Related papers: Expected utility operators and coinsurance problem
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
This paper focuses on specific investments under negotiated transfer pricing. Reasons for transfer pricing studies are primarily to find conditions that maximize the firm's overall profit, especially in cases with bilateral trading problems…
We consider a diffusion approximation to an insurance risk model where an external driver models a stochastic environment. The insurer can buy reinsurance. Moreover, investment in a financial market is possible. The financial market is also…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…
Many causal parameters depend on a moment of the joint distribution of potential outcomes. Such parameters are especially relevant in policy evaluation settings, where noncompliance is common and accommodated through the model of Imbens &…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
The present paper introduces a theoretical framework through which the degree of risk aversion with respect to uncertain prices can be measured through the context of the indirect utility function (IUF) using a lab experiment. First, the…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
We provide a new algorithm for solving Risk Sensitive Partially Observable Markov Decisions Processes, when the risk is modeled by a utility function, and both the state space and the space of observations is finite. This algorithm is based…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
We propose a new risk-constrained reformulation of the standard Linear Quadratic Regulator (LQR) problem. Our framework is motivated by the fact that the classical (risk-neutral) LQR controller, although optimal in expectation, might be…
We investigate an expected utility maximization problem under model uncertainty in a one-period financial market. We capture model uncertainty by replacing the baseline model $\mathbb{P}$ with an adverse choice from a Wasserstein ball of…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
We study optimal monetary policy when a central bank maximizes a quantile utility objective rather than expected utility. In our framework, the central bank's risk attitude is indexed by the quantile index level, providing a transparent…
An important but understudied question in economics is how people choose when facing uncertainty in the timing of events. Here we study preferences over time lotteries, in which the payment amount is certain but the payment time is…
We propose a methodology for performing risk-averse quadratic regulation of partially observed Linear Time-Invariant (LTI) systems disturbed by process and output noise. To compensate against the induced variability due to both types of…
We study a problem of utility maximization under model uncertainty with information including jumps. We prove first that the value process of the robust stochastic control problem is described by the solution of a quadratic-exponential…