Related papers: Investing for the Long Run
In this article we solve the problem of maximizing the expected utility of future consumption and terminal wealth to determine the optimal pension or life-cycle fund strategy for a cohort of pension fund investors. The setup is strongly…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
Drifts of asset returns are notoriously difficult to model accurately and, yet, trading strategies obtained from portfolio optimization are very sensitive to them. To mitigate this well-known phenomenon we study robust growth-optimization…
This paper studies a portfolio allocation problem, where the goal is to prescribe the wealth distribution at the final time. We study this problem with the tools of optimal mass transport. We provide a dual formulation which we solve by a…
Stochastic Discount Factor (SDF) models provide a unified framework for asset pricing and risk assessment, yet traditional formulations struggle to incorporate unstructured textual information. We introduce NewsNet-SDF, a novel deep…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following geometric Brownian motion as in the Black-Scholes model. Under a constant rate of consumption, we find the…
We propose an optimal portfolio problem in the incomplete market where the underlying assets depend on economic factors with delayed effects, such models can describe the short term forecasting and the interaction with time lag among…
We study a practical optimization problems for venture capital investments and/or Research and Development (R&D) investments. The first problem is that, given the amount of the initial investment and the reward function at the initial…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
Financial portfolio management is one of the problems that are most frequently encountered in the investment industry. Nevertheless, it is not widely recognized that both Kelly Criterion and Risk Parity collapse into Mean Variance under…
We analyze the problem of optimal reduction of the debt-to-GDP ratio in a stochastic control setting. The debt-to-GDP dynamics are modeled through a stochastic differential equation in which fiscal policy simultaneously affects both debt…