Related papers: Simple Explicit Formula for Near-Optimal Stochasti…
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…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
Stochastic processes offer a flexible mathematical formalism to model and reason about systems. Most analysis tools, however, start from the premises that models are fully specified, so that any parameters controlling the system's dynamics…
Economic systems are similar with physic systems for their large number of individuals and the exist of equilibrium. In this paper, we present a model applying the equilibrium statistical model in economic systems. Consistent with…
I discuss some theoretical results with a view to motivate some practical choices in portfolio optimization. Even though the setting is not completely general (for example, the covariance matrix is assumed to be non-singular), I attempt to…
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
Organisms and ecological groups accumulate evidence to make decisions. Classic experiments and theoretical studies have explored this process when the correct choice is fixed during each trial. However, we live in a constantly changing…
We propose a general scenario to analyze social and economic changes in modern environments. We illustrate the ideas with a model that incorporating the main trends is simple enough to extract analytical results and, at the same time,…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
To describe the nonequilibrium states of a system we introduce a new thermodynamic parameter - the lifetime (the first passage time) of a system. The statistical distributions that can be obtained out of the mesoscopic description…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
For $n$ assets and discrete-time rebalancing, the probability to complete a given schedule of investments and withdrawals is maximized over progressively measurable portfolio weight functions. Applications consider two assets, namely the…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…
Survival analysis, or time-to-event modelling, is a classical statistical problem that has garnered a lot of interest for its practical use in epidemiology, demographics or actuarial sciences. Recent advances on the subject from the point…
We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic volatility and unknown stock appreciation rate. The volatility parameter is driven by an external economic factor modeled as a…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
The quasi-steady-state approximation (or stochastic averaging principle) is a useful tool in the study of multiscale stochastic systems, giving a practical method by which to reduce the number of degrees of freedom in a model. The method is…
We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant…