Related papers: Necessity of Hyperbolic Absolute Risk Aversion for…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
We show that risk-aware behaviors in demand response originate from superquadratic state-dependent cost functions and price uncertainty with skewed distributions. We obtain such results through developing a novel theoretical demand response…
Gilboa and Schmeidler's (1989) uncertainty aversion plays a central role in decision theory and economics, yet many inconsistent behaviors have been observed in experiments. Motivated by this, we study an axiom postulating a minimal degree…
I summarize Bagnoli and Bergstrom (2005)'s review on log-concave functions, make several corrections, and augment the discussion with further results that can be useful in obtaining monotone hazard rate. I also provide an application of…
Credit risk may be warehoused by choice, or because of limited hedging possibilities. Credit risk warehousing increases capital requirements and leaves open risk. Open risk must be priced in the physical measure, rather than the risk…
This paper studies an $\alpha$-robust utility maximization problem where an investor faces an intractable claim -- an exogenous contingent claim with known marginal distribution but unspecified dependence structure with financial market…
Toy models for the Hubble rate or the scalar field potential have been used to analyze the amplification of scalar perturbations through a smooth transition from inflation to the radiation era. We use a Hubble rate that arises consistently…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
This paper generalizes results concerning strong convexity of two-stage mean-risk models with linear recourse to distortion risk measures. Introducing the concept of (restricted) partial strong convexity, we conduct an in-depth analysis of…
In reliability theory and survival analysis, observed data are often weakly dependent and subject to additive measurement errors. Such contamination arises when the underlying data are neither independent nor strongly mixed but instead…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
The standard approach to risk-averse control is to use the Exponential Utility (EU) functional, which has been studied for several decades. Like other risk-averse utility functionals, EU encodes risk aversion through an increasing convex…
Traditional learning approaches for classification implicitly assume that each mistake has the same cost. In many real-world problems though, the utility of a decision depends on the underlying context $x$ and decision $y$. However,…
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
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…
A key issue in the estimation of energy hedges is the hedgers' attitude towards risk which is encapsulated in the form of the hedgers' utility function. However, the literature typically uses only one form of utility function such as the…
Safe exploration presents a major challenge in reinforcement learning (RL): when active data collection requires deploying partially trained policies, we must ensure that these policies avoid catastrophically unsafe regions, while still…
We present a theory of expected utility with state-dependent linear utility functions for monetary returns, that incorporates the possibility of loss-aversion. Our results relate to first order stochastic dominance, mean-preserving spread,…
We present a necessary and sufficient condition for Alt's system to be represented by a continuous utility function. Moreover, we present a necessary and sufficient condition for this utility function to be concave. The latter condition can…