Related papers: Simple Explicit Formula for Near-Optimal Stochasti…
In this paper, a mathematically rigorous solution overturns existing wisdom regarding New Keynesian Dynamic Stochastic General Equilibrium. I develop a formal concept of stochastic equilibrium. I prove uniqueness and necessity, when agents…
A new stochastic control problem of population dynamics under partial observation is formulated and analyzed both mathematically and numerically, with an emphasis on environmental and ecological problems. The decision-maker can only…
We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) a Markovian…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
This paper presents a semi-quantitative mathematical model of the changes over time in the statistical distribution of well-being of individuals in a society. The model predicts that when individuals overvalue the more socially conspicuous…
We study a stochastic multiplicative system composed of finite asynchronous elements to describe the wealth evolution in financial markets. We find that the wealth fluctuations or returns of this system can be described by a walk with…
In this paper, a new three-parameter lifetime distribution is introduced and many of its standard properties are discussed. These include shape of the probability density function, hazard rate function and its shape, quantile function,…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We study an infinite-horizon optimal investment, consumption and insurance problem for an economic agent who consumes a perishable and a durable good. The agent trades in a risk-free asset, a risky asset, and a durable good whose price…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
We consider a portfolio optimisation problem for a utility-maximising investor who faces convex constraints on his portfolio allocation in Heston's stochastic volatility model. We apply the duality methods developed in previous work to…
The problem of portfolio optimization when stochastic factors drive returns and volatilities has been studied in previous works by the authors. In particular, they proposed asymptotic approximations for value functions and optimal…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
Stochastic dominance is a preference relation of uncertain prospect defined over a class of utility functions. While this utility class represents basic properties of risk aversion, it includes some extreme utility functions rarely…
The significance of mortality modeling extends across multiple research areas, ranging from life insurance valuation to optimal lifetime decision-making. Existing approaches, such as mortality laws and factor-based models, often fall short…
Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be…
Stochastic dominance serves as a general framework for modeling a broad spectrum of decision preferences under uncertainty, with risk aversion as one notable example, as it naturally captures the intrinsic structure of the underlying…
We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock's price fluctuations. With linear temporary price impact the resulting optimal investment problem with…
Researchers have widely used accelerated life tests to determine an optimal inspection plan for lot acceptance. All such plans are proposed by assuming a known relationship between the lifetime characteristic(s) and the accelerating stress…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…