Related papers: Insider information and its relation with the arbi…
In this paper, we consider a num\'eraire-based utility maximization problem under constant proportional transaction costs and random endowment. Assuming that the agent cannot short sell assets and is endowed with a strictly positive…
This note will extend the research presented in Brown & Rogers (2009) to the case of CRRA agents. We consider the model outlined in that paper in which agents had diverse beliefs about the dividends produced by a risky asset. We now assume…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…
In this paper we extend the stability results of [4]}. Our utility maximization problem is defined as an essential supremum of conditional expectations of the terminal values of wealth processes, conditioned on the filtration at the…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
Institutions and investors face the constant challenge of making accurate decisions and predictions regarding how best they should distribute their endowments. The problem of achieving an optimal outcome at minimal cost has been extensively…
We study the optimal control of storage which is used for both arbitrage and buffering against unexpected events, with particular applications to the control of energy systems in a stochastic and typically time-heterogeneous environment.…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
A seller sells an object over time but is uncertain how the buyer learns their willingness-to-pay. We consider informational robustness under \textit{limited commitment}, where the seller offers a price \textit{each period} to maximize…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
This paper describes a novel approach to planning which takes advantage of decision theory to greatly improve robustness in an uncertain environment. We present an algorithm which computes conditional plans of maximum expected utility. This…
The emergent behavior of a distributed system is conditioned by the information available to the local decision-makers. Therefore, one may expect that providing decision-makers with more information will improve system performance; in this…
Strategic information is valuable either by remaining private (for instance if it is sensitive) or, on the other hand, by being used publicly to increase some utility. These two objectives are antagonistic and leaking this information might…
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…
A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In…
This paper studies decision problems where the decision maker's choice of action affects the probability distribution of a payoff relevant random variable. We establish sufficient conditions for the existence of an expected utility…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
In this paper, we study the behavior of information ratio (IR) as determined by the fundamental law of active investment management. We extend the classic relationship between IR and its two determinants (i.e., information coefficient and…