Related papers: Time-inconsistent consumption-investment problems …
We present a methodology for obtaining explicit solutions to infinite time horizon optimal stopping problems involving general, one-dimensional, It\^o diffusions, payoff functions that need not be smooth and state-dependent discounting.…
A fundamental theory of deterministic linear-quadratic (LQ) control is the equivalent relationship between control problems, two-point boundary value problems and Riccati equations. In this paper, we extend the equivalence to a general…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
We study a general class of consumption-savings problems with recursive preferences. We characterize the sign of the consumption response to arbitrary shocks in terms of the product of two sufficient statistics: the elasticity of…
In this paper we investigate possible approaches to study general time-inconsistent optimization problems without assuming the existence of optimal strategy. This leads immediately to the need to refine the concept of time-consistency as…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…
We study time-inconsistent recursive stochastic control problems, i.e., for which the Bellman principle of optimality does not hold. For this class of problems classical optimal controls may fail to exist, or to be relevant in practice, and…
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 investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…
In intertemporal settings, the multiattribute utility theory of Kihlstrom and Mirman suggests the application of a concave transform of the lifetime utility index. This construction, while allowing time and risk attitudes to be separated,…
We prove that the consumption functions in optimal savings problems are asymptotically linear if the marginal utility is regularly varying. We also analytically characterize the asymptotic marginal propensities to consume (MPCs) out of…
In this paper, we study a time-inconsistent stochastic optimal control problem with a recursive cost functional by a multi-person hierarchical differential game approach. An equilibrium strategy of this problem is constructed and a…
An optimal control problem is considered for a stochastic differential equation containing a state-dependent regime switching, with a recursive cost functional. Due to the non-exponential discounting in the cost functional, the problem is…
This paper addresses the challenge of time-inconsistent stochastic control within a continuous-time framework. Its primary focus lies in uncovering a probabilistic representation, specifically in the shape of a system of backward stochastic…
The paper is devoted to obtain first and second order necessary optimality conditions for continuous-time optimization problems with equality and inequality constraints. A full rank type regularity condition along with an uniform implicit…
The desirable gambles framework provides a foundational approach to imprecise probability theory but relies heavily on linear utility assumptions. This paper introduces function-coherent gambles, a generalization that accommodates…
For optimal stopping problems with time-inconsistent preference, we measure the inherent level of time-inconsistency by taking the time needed to turn the naive strategies into the sophisticated ones. In particular, when in a repeated…
We consider a two-product inventory system with independent Poisson demands, limited joint storage capacity and partial demand substitution. Replenishment is performed simultaneously for both products and the replenishment time may be fixed…