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We extend the theory of asymmetric information in mispricing models for stocks following geometric Brownian motion to constant relative risk averse investors. Mispricing follows a continuous mean--reverting Ornstein--Uhlenbeck process.…
We address the challenging problem of dynamically pricing complementary items that are sequentially displayed to customers. An illustrative example is the online sale of flight tickets, where customers navigate through multiple web pages.…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
Motivated by the current global high inflation scenario, we aim to discover a dynamic multi-period allocation strategy to optimally outperform a passive benchmark while adhering to a bounded leverage limit. To this end, we formulate an…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
We consider the Merton problem of optimizing expected power utility of terminal wealth in the case of an unobservable Markov-modulated drift. What makes the model special is that the agent is allowed to purchase costly expert opinions of…
We consider the problem of optimal investment in a market with two cointegrated stocks and an agent with CRRA utility. We extend the findings of Liu and Timmermann [The Review of Financial Studies, 26(4):1048-1086, 2013] by paying special…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
Empirical studies indicate the existence of long range dependence in the volatility of the underlying asset. This feature can be captured by modeling its return and volatility using functions of a stationary fractional Ornstein--Uhlenbeck…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
Portfolio optimization is an important process in finance that consists in finding the optimal asset allocation that maximizes expected returns while minimizing risk. When assets are allocated in discrete units, this is a combinatorial…
In this paper, we propose a machine learning algorithm for time-inconsistent portfolio optimization. The proposed algorithm builds upon neural network based trading schemes, in which the asset allocation at each time point is determined by…
We study an online learning problem on dynamic pricing and resource allocation, where we make joint pricing and inventory decisions to maximize the overall net profit. We consider the stochastic dependence of demands on the price, which…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
Portfolio traders strive to identify dynamic portfolio allocation schemes so that their total budgets are efficiently allocated through the investment horizon. This study proposes a novel portfolio trading strategy in which an intelligent…