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In this paper we study a robust utility maximization problem in continuous time under model uncertainty. The model uncertainty is governed by a continuous semimartingale with uncertain local characteristics. Here, the differential…
While $\mathcal{H}_\infty$ methods can introduce robustness against worst-case perturbations, their nominal performance under conventional stochastic disturbances is often drastically reduced. Though this fundamental tradeoff between…
We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs…
In this paper we investigate a class of swing options with firm constraints in view of the modeling of supply agreements. We show, for a fully general payoff process, that the premium, solution to a stochastic control problem, is concave…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments;…
We consider a moral hazard problem with multiple principals in a continuous-time model. The agent can only work exclusively for one principal at a given time, so faces an optimal switching problem. Using a randomized formulation, we manage…
This work studies equilibrium problems under uncertainty where firms maximize their profits in a robust way when selling their output. Robust optimization plays an increasingly important role when best guaranteed objective values are to be…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
In this paper, we take up the analysis of a principal/agent model with moral hazard introduced in [17], with optimal contracting between competitive investors and an impatient bank monitoring a pool of long-term loans subject to Markovian…
We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…
We study a stochastic recursive optimal control problem in which the cost functional is described by the solution of a backward stochastic differential equation driven by G-Brownian motion. Some of the economic and financial optimization…
Stochastic control problems related to optimal advertising under uncertainty are considered. In particular, we determine the optimal strategies for the problem of maximizing the utility of goodwill at launch time and minimizing the…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
We consider optimal design of infinite-dimensional Bayesian linear inverse problems governed by partial differential equations that contain secondary reducible model uncertainties, in addition to the uncertainty in the inversion parameters.…
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…
Overconservatism has long been recognized as a major issue with robust optimization, despite its key advantages of tractability, performance guarantee, and limited information. To address this issue, a new criterion is proposed that can…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
When machine learning is outsourced to a rational agent, conflicts of interest might arise and severely impact predictive performance. In this work, we propose a theoretical framework for incentive-aware delegation of machine learning…