Related papers: Two Stochastic Control Problems In Capital Structu…
By the calculus of Peng's G-sublinear expectation and G-Brownian motion on a sublinear expectation space $(\Omega, {\cal H}, \hat{\mathbb{E}})$, we first set up an optimality principle of stochastic control problem. Then we investigate an…
We present a robust version of the life-cycle optimal portfolio choice problem in the presence of labor income, as introduced in Biffis, Gozzi and Prosdocimi ("Optimal portfolio choice with path dependent labor income: the infinite horizon…
The signal-noise ratio of a portfolio of p assets, its expected return divided by its risk, is couched as an estimation problem on the sphere. When the portfolio is built using noisy data, the expected value of the signal-noise ratio is…
In this work, we address the optimal retirement problem in the presence of a stochastic wage, formulated as a free boundary problem. Specifically, we explore an incomplete market setting where the wage cannot be perfectly hedged through…
This paper addresses the challenge of model uncertainty in quantitative finance, where decisions in portfolio allocation, derivative pricing, and risk management rely on estimating stochastic models from limited data. In practice, the…
We study an agent's lifecycle portfolio choice problem with stochastic labor income, borrowing constraints and a finite retirement date. Similarly to arXiv:2002.00201, wages evolve in a path-dependent way, but the presence of a finite…
Incomplete financial markets are considered, defined by a multi-dimensional non-homogeneous diffusion process, being the direct sum of an It\^{o} process (the price process), and another non-homogeneous diffusion process (the exogenous…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
Dual control explicitly addresses the problem of trading off active exploration and exploitation in the optimal control of partially unknown systems. While the problem can be cast in the framework of stochastic dynamic programming, exact…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
This paper studies stochastic control problems motivated by optimal consumption with wealth benchmark tracking. The benchmark process is modeled by a combination of a geometric Brownian motion and a running maximum process, indicating its…
Structuring a viable pension plan is a problem that arises in the study of financial contracts pricing and bears special importance these days. Deterministic pension models often rely on projections that are based on several assumptions…
In this paper, we undertake an investigation into the utility maximization problem faced by an economic agent who possesses the option to switch jobs, within a scenario featuring the presence of a mandatory retirement date. The agent needs…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
In this paper we develop a concrete and fully implementable approach to the optimization of functionally generated portfolios in stochastic portfolio theory. The main idea is to optimize over a family of rank-based portfolios parameterized…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
The decumulation of a defined contribution (DC) pension plan is well known to be one of the hardest problems in finance. We model this decumulation challenge as an optimal stochastic control problem. The control problem is solved, at each…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
In the present paper, the primal-dual problem consisting of the investment risk minimization problem and the expected return maximization problem in the mean-variance model is discussed using replica analysis. As a natural extension of the…