Related papers: When to sell an asset amid anxiety about drawdowns

While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…

When decision makers evaluate a sequence of rewards, they may pay more attention to larger rewards and, given attention is limited, less attention to smaller rewards. They may also become less attentive to each reward when attention is…

Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…

In this paper, we work in the framework of the Merton problem but we impose a drawdown constraint on the consumption process. This means that consumption can never fall below a fixed proportion of the running maximum of past consumption. In…

This paper formulates and solves the optimal stopping problem for a loan made to one's self from a tax-advantaged retirement account such as a 401(k), 403(b), or 457(b) plan. If the plan participant has access to an external asset with a…

We consider the classic Kelly gambling problem with general distribution of outcomes, and an additional risk constraint that limits the probability of a drawdown of wealth to a given undesirable level. We develop a bound on the drawdown…

We develop a complete analysis of a general entry-exit-scrapping model. In particular, we consider an investment project that operates within a random environment and yields a payoff rate that is a function of a stochastic economic…

We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…

We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…

We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…

An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…

We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We suggest to use path-wise growth optimality as the decision criterion and encode preferences through restrictions on the class…

We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level…

A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…

An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.

We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…

This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…

An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…

This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…

This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…