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We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic volatility and unknown stock appreciation rate. The volatility parameter is driven by an external economic factor modeled as a…
We introduce a bond portfolio management theory based on foundations similar to those of stock portfolio management. A general continuous-time zero-coupon market is considered. The problem of optimal portfolios of zero-coupon bonds is…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
We treat utility maximization from terminal wealth for an agent with utility function $U:\mathbb{R}\to\mathbb{R}$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default…
Transaction costs play a critical role in asset allocation and consumption strategies in portfolio management. We apply the methods of dynamic programming and singular perturbation expansion to derive the closed-form leading solutions to…
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…
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…
This paper considers mean-variance optimization under uncertainty, specifically when one desires a sparsified set of optimal portfolio weights. From the standpoint of a Bayesian investor, our approach produces a small portfolio from many…
We consider non-concave and non-smooth random utility functions with do- main of definition equal to the non-negative half-line. We use a dynamic pro- gramming framework together with measurable selection arguments to establish both the…
This paper is concerned with an optimal investment problem under correlated noises in the financial market, and the expected utility functional is hyperbolic absolute risk aversion (HARA) with the exponent $\gamma\neq0$. The problem can be…
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…
This work proposes a novel degradation-infused energy portfolio allocation (DI-EPA) framework for enabling the participation of battery energy storage systems in multi-service electricity markets. The proposed framework attempts to address…
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma…
We extend the Annually Recalculated Virtual Annuity (ARVA) spending rule for retirement savings decumulation to include a cap and a floor on withdrawals. With a minimum withdrawal constraint, the ARVA strategy runs the risk of depleting the…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We study how to assess the potential benefit of diversifying an equity portfolio by investing within and across equity sectors. We analyse 20 years of US stock price data, which includes the global financial crisis (GFC) and the COVID-19…