Related papers: The investor problem based on the HJM model
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We study the optimal stopping problem of pricing an American Put option on a Zero Coupon Bond (ZCB) in the Musiela's parametrization of the Heath-Jarrow-Morton (HJM) model for forward interest rates. First we show regularity properties of…
The main purpose of this paper is to analyze solutions to a fully nonlinear parabolic equation arising from the problem of optimal portfolio construction. We show how the problem of optimal stock to bond proportion in the management of…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…
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 consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
We consider a problem of optimal investment with intermediate consumption in the framework of an incomplete semimartingale model of a financial market. We show that a necessary and sufficient condition for the validity of key assertions of…
This paper presents SIMPOL (Simplified Policy Iteration), a modular numerical framework for solving continuous-time heterogeneous agent models. The core economic problem, the optimization of consumption and savings under idiosyncratic…
The paper studies a system of first order Hamilton-Jacobi equations with discontinuous coefficients, arising from a model of deterministic optimal debt management in infinite time horizon, with exponential discount and currency devaluation.…
We analyze the consumption-portfolio selection problem of an investor facing both Brownian and jump risks. We bring new tools, in the form of orthogonal decompositions, to bear on the problem in order to determine the optimal portfolio in…
We price European-style options written on forward contracts in a commodity market, which we model with an infinite-dimensional Heath-Jarrow-Morton (HJM) approach. For this purpose we introduce a new class of state-dependent volatility…
In this paper we solve the hedge fund manager's optimization problem in a model that allows for investors to enter and leave the fund over time depending on its performance. The manager's payoff at the end of the year will then depend not…
In this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and…
This study employs expected certainty equivalents to explore the reinsurance and investment issue pertaining to an insurer that aims to maximize the expected utility while being subject to random risk aversion. The insurer's surplus process…
We consider a time-consistent mean-variance portfolio selection problem of an insurer and allow for the incorporation of basis (mortality) risk. The optimal solution is identified with a Nash subgame perfect equilibrium. We characterize an…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
We consider the classical multi-asset Merton investment problem under drift uncertainty, i.e. the asset price dynamics are given by geometric Brownian motions with constant but unknown drift coefficients. The investor assumes a prior drift…
We statistically analyse a multivariate HJM diffusion model with stochastic volatility. The volatility process of the first factor is left totally unspecified while the volatility of the second factor is the product of an unknown process…
We consider an investment problem in which an investor performs capital injections to increase the liquidity of a firm for it to maximise profit from market operations. Each time the investor performs an injection, the investor incurs a…
We consider the problem of portfolio optimization in a simple incomplete market and under a general utility function. By working with the associated Hamilton-Jacobi-Bellman partial differential equation (HJB PDE), we obtain a closed-form…