Related papers: Optimal investment and consumption with labor inco…
In this paper, we investigate an optimal investment and consumption problem for an investor who trades in a Black--Scholes financial market with stochastic coefficients driven by a non-Gaussian Ornstein--Uhlenbeck process. We assume that an…
We study utility maximization for power utility random fields with and without intermediate consumption in a general semimartingale model with closed portfolio constraints. We show that any optimal strategy leads to a solution of the…
We consider an optimal liquidation problem with instantaneous price impact and stochastic resilience for small instantaneous impact factors. Within our modelling framework, the optimal portfolio process converges to the solution of an…
We study the dual formulation of the utility maximization problem in incomplete markets when the utility function is finitely valued on the whole real line. We extend the existing results in this literature in two directions. First, we…
In a market with stochastic investment opportunities, we study an optimal consumption investment problem for an agent with recursive utility of Epstein-Zin type. Focusing on the empirically relevant specification where both risk aversion…
We analyze an irreversible investment decision for a project which yields a flow of future operating profits given by a geometric Brownian motion with unknown drift. In contrast to similar optimal stopping problems with incomplete…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
We offer mathematical tractability and new insights for a framework of exponential utility with non-negative consumption, a constraint often omitted in the literature giving rise to economically unviable solutions. Specifically, using the…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
This work takes up the challenges of utility maximization problem when the market is indivisible and the transaction costs are included. First there is a so-called solvency region given by the minimum margin requirement in the problem…
In this paper, we study a time-inconsistent consumption-investment problem with random endowments in a possibly incomplete market under general discount functions. We provide a necessary condition and a verification theorem for an open-loop…
This paper studies a loss-averse version of the multiplicative habit formation preference and the corresponding optimal investment and consumption strategies over an infinite horizon. The agent's consumption preference is depicted by a…
We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and stochastic differential utility. For Epstein-Zin utility, duality between the primal and dual problems is…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
This paper investigates the optimal consumption, investment, and life insurance/annuity decisions for a family in an inflationary economy under money illusion. The family can invest in a financial market that consists of nominal bonds,…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
This paper studies an optimal consumption problem with both relaxed benchmark tracking and consumption drawdown constraint, leading to a stochastic control problem with dynamic state-control constraints. In our relaxed tracking formulation,…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…