Related papers: Simple Explicit Formula for Near-Optimal Stochasti…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
This study introduces an optimal mechanism in a dynamic stochastic knapsack environment. The model features a single seller who has a fixed quantity of a perfectly divisible item. Impatient buyers with a piece-wise linear utility function…
Multiple species in the ecosystem are believed to compete cyclically for survival and thus maintain balance in nature. Stochasticity has also an inevitable role in this dynamics. Considering these attributes of nature, the stochastic…
We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a…
Nested stochastic modeling has been on the rise in many fields of the financial industry. Such modeling arises whenever certain components of a stochastic model are stochastically determined by other models. There are at least two main…
We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…
In this paper,we study the individual's optimal retirement time and optimal consumption under habitual persistence. Because the individual feels equally satisfied with a lower habitual level and is more reluctant to change the habitual…
Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps (1979). In the context of optimal portfolio selection with expected utility preferences this…
We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of…
We adapt Leland's dynamic capital structure model to the context of an insurance company selling participating life insurance contracts explaining the existence of life insurance contracts which provide both a guaranteed payment and surplus…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
In multi-period stochastic optimization problems, the future optimal decision is a random variable whose distribution depends on the parameters of the optimization problem. We analyze how the expected value of this random variable changes…
Equity markets have long been regarded as unpredictable, with intraday price movements treated as stochastic noise. This study challenges that view by introducing the Extended Samuelson Model (ESM), a natural science-based framework that…
In this work, we consider rule-based investment strategies for managing a defined contribution saving scheme under the Dutch pension fund testing model. We found that dynamic rule-based investment can outperform traditional static…
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which,…
A succesful method to describe the asymptotic behavior of a discrete time stochastic process governed by some recursive formula is to relate it to the limit sets of a well chosen mean differential equation. Under an attainability condition,…
This paper characterizes optimal classification when individuals adjust their behavior in response to the classification rule. We model the interaction between a designer and a population as a Stackelberg game: the designer selects a…
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…