Related papers: Insider information and its relation with the arbi…
In this paper, we consider a multi-attribute decision making problem where the decision maker's (DM's) objective is to maximize the expected utility of outcomes but the true utility function which captures the DM's risk preference is…
The question addressed in this paper is the performance of the optimal strategy, and the impact of partial information. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable…
We study the anticipating version of the classical portfolio optimization problem in a financial market with the presence of a trader who possesses privileged information about the future (insider information), but who is also subjected to…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
We study the single-period portfolio selection problem under Constant Relative Risk-Aversion (CRRA) utility through the information-theoretic lens. Assuming only that the market payoff vector has finite support, we show that the…
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new…
This paper considers finitely many investors who perform mean-variance portfolio selection under relative performance criteria. That is, each investor is concerned about not only her terminal wealth, but how it compares to the average…
We study the problem of determining an effective exploration strategy in static and non-linear optimization problems, which depend on an unknown scalar parameter to be learned from online collected noisy data. An optimal trade-off between…
This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable,…
This paper studies an optimal consumption problem for a loss-averse agent with reference to past consumption maximum. To account for loss aversion on relative consumption, an S-shaped utility is adopted that measures the difference between…
The problem of data uncertainty has motivated the incorporation of robust optimization in various arenas, beyond the Markowitz portfolio optimization. This work presents the extension of the robust optimization framework for the…
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…
Most insurance contracts are inherently linked to financial markets, be it via interest rates, or -- as hybrid products like equity-linked life insurance and variable annuities -- directly to stocks or indices. However, insurance contracts…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
Algorithm designers typically assume that the input data is correct, and then proceed to find "optimal" or "sub-optimal" solutions using this input data. However this assumption of correct data does not always hold in practice, especially…
The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent's use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the…
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…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
The relative arbitrage portfolio outperforms a benchmark portfolio over a given time-horizon with probability one. With market price of risk processes depending on the market portfolio and investors, this paper analyzes the multi-agent…