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A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
We find the optimal investment strategy to minimize the expected time that an individual's wealth stays below zero, the so-called {\it occupation time}. The individual consumes at a constant rate and invests in a Black-Scholes financial…
We consider learning a trading agent acting on behalf of the treasury of a firm earning revenue in a foreign currency (FC) and incurring expenses in the home currency (HC). The goal of the agent is to maximize the expected HC at the end of…
We present a methodology for obtaining explicit solutions to infinite time horizon optimal stopping problems involving general, one-dimensional, It\^o diffusions, payoff functions that need not be smooth and state-dependent discounting.…
Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
We consider an online resource allocation problem where multiple resources, each with an individual initial capacity, are available to serve random requests arriving sequentially over multiple discrete time periods. At each time period, one…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution…
Reinforcement learning has been explored for many problems, from video games with deterministic environments to portfolio and operations management in which scenarios are stochastic; however, there have been few attempts to test these…
This note re-visits the rolling-horizon control approach to the problem of a Markov decision process (MDP) with infinite-horizon discounted expected reward criterion. Distinguished from the classical value-iteration approach, we develop an…
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…
This paper concerns an optimal impulse control problem associated with a refracted L\'{e}vy process, involving the reduction of reserves to a predetermined level whenever they exceed a specified threshold. The ruin time is determined by…
We study the impact of learning on the optimal policy and the time-to-decision in an infinite-horizon Bayesian sequential decision model with two irreversible alternatives, exit and expansion. In our model, a firm undertakes a small-scale…
This paper studies the mean-variance optimal portfolio choice of an investor pre-committed to a deterministic investment policy in continuous time in a market with mean-reversion in the risk-free rate and the equity risk-premium. In the…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
Retirees who exhaust their savings while still alive are said to experience financial ruin. These savings are typically grown during the accumulation phase then spent during the retirement decumulation phase. Extensive research into…
Sharpe et al. proposed the idea of having an expected utility maximizer choose a probability distribution for future wealth as an input to her investment problem instead of a utility function. They developed a computer program, called The…