Related papers: Simple Explicit Formula for Near-Optimal Stochasti…

The steady-state turnover of a trading strategy is of clear interest to practitioners and portfolio managers, as is the steady-state Sharpe ratio. In this article, we show that in a convenient Gaussian process model, the steady-state…

We formulate an infinite-horizon optimal investment and consumption problem, in which an individual forms a habit based on the exponentially weighted average of her past consumption rate, and in which she invests in a Black-Scholes market.…

Recurrent boom-and-bust cycles are a salient feature of economic and financial history. Cycles found in the data are stochastic, often highly persistent, and span substantial fractions of the sample size. We refer to such cycles as "long".…

This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…

We find the optimal investment strategy to minimize the expected time that an individual's wealth stays below zero, the so-called {\it occupation time}. The individual consumes at a constant rate and invests in a Black-Scholes financial…

Ergodicity describes an equivalence between the expectation value and the time average of observables. Applied to human behaviour, ergodic theories of decision-making reveal how individuals should tolerate risk in different environments. To…

Nontransitive choices have long been an area of curiosity within economics. However, determining whether nontransitive choices represent an individual's preference is a difficult task since choice data is inherently stochastic. This paper…

Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that…

We study the societal impact of pseudo-scientific assumptions for predicting the behavior of people in a straightforward application of machine learning to risk prediction in financial lending. This use case also exemplifies the impact of…

This paper investigates the consumption and risk taking decision of an economic agent with partial irreversibility of consumption decision by formalizing the theory proposed by Duesenberry (1949). The optimal policies exhibit a type of the…

The analysis of the demographic transition of the past century and a half, using both empirical data and mathematical models, has rendered a wealth of well-established facts, including the dramatic increases in life expectancy. Despite…

For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…

In this letter we present a stochastic dynamic model which can explain economic cycles. We show that the macroscopic description yields a complex dynamical landscape consisting of multiple stable fixed points, each corresponding to a split…

Poisson's equation plays a fundamental role as a tool for performance evaluation and optimization of Markov chains. For continuous-time birth-death chains with possibly unbounded transition and cost rates as addressed herein, when…

We prove the strong consistency and the asymptotic normality of the maximum likelihood estimator of the parameters of a general conditionally heteroscedastic model with $\alpha$-stable innovations. Then, we relax the assumptions and only…

Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…

We determine the optimal investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of going bankrupt before she dies, also known as {\it lifetime ruin}. We impose two types of…

Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's…

We propose a data-driven Neural Network (NN) optimization framework to determine the optimal multi-period dynamic asset allocation strategy for outperforming a general stochastic target. We formulate the problem as an optimal stochastic…

We consider a simplified version of the Wealth Game, which is an agent-based financial market model with many interesting features resembling the real stock market. Market makers are not present in the game so that the majority traders are…