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In business, politics and life, folk wisdom encourages people to aim for above-average results, but to not let the perfect be the enemy of the good. Here, we mathematically formalize and extend this folk wisdom. We model a time-limited…
A monopolist wishes to maximize her profits by finding an optimal price policy. After she announces a menu of products and prices, each agent $x$ will choose to buy that product $y(x)$ which maximizes his own utility, if positive. The…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
Attempts to allocate capital across a selection of different investments are often hampered by the fact that investors' decisions are made under limited information (no historical return data) and during an extremely limited timeframe.…
Optimal portfolio allocation is often formulated as a constrained risk problem, where one aims to minimize a risk measure subject to some performance constraints. This paper presents new Bayesian Optimization algorithms for such constrained…
Empirical researchers and decision-makers spanning various domains frequently seek profound insights into the long-term impacts of interventions. While the significance of long-term outcomes is undeniable, an overemphasis on them may…
This paper considers the optimal management structure about hiring a manager and providing the manager with a separate salary and bonus using a relational contract among an owner, a manager, and workers, assuming that the manager can…
We consider the problem of optimal investment with random endowment in a Black--Scholes market for an agent with constant relative risk aversion. Using duality arguments, we derive an explicit expression for the optimal trading strategy,…
We consider the classical problem of sequential resource allocation where a decision maker must repeatedly divide a budget between several resources, each with diminishing returns. This can be recast as a specific stochastic optimization…
We consider a social planner faced with a stream of myopic selfish agents. The goal of the social planner is to maximize the social welfare, however, it is limited to using only information asymmetry (regarding previous outcomes) and cannot…
The coordinated and efficient distribution of limited resources by individual decisions is a fundamental, unsolved problem. When individuals compete for road capacities, time, space, money, goods, etc., they normally make decisions based on…
Minimizing volatility and adjustment costs is of central importance in many economic environments, yet it is often complicated by evolving feasibility constraints. We study a decision maker who repeatedly selects an action from a…
We consider Incentive Decision Processes, where a principal seeks to reduce its costs due to another agent's behavior, by offering incentives to the agent for alternate behavior. We focus on the case where a principal interacts with a…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
This paper studies a variable proportion portfolio insurance (VPPI) strategy. The objective is to determine the risk multiplier by maximizing the extended Omega ratio of the investor's cushion, using a binary stochastic benchmark. When the…
We consider the problem of sequentially making decisions that are rewarded by "successes" and "failures" which can be predicted through an unknown relationship that depends on a partially controllable vector of attributes for each instance.…
We introduce a novel framework to account for sensitivity to rewards uncertainty in sequential decision-making problems. While risk-sensitive formulations for Markov decision processes studied so far focus on the distribution of the…
We maximize the expected utility from terminal wealth for an HARA investor when the market price of risk is an unobservable random variable. We compute the optimal portfolio explicitly and explore the effects of learning by comparing it…