Related papers: Consumption-investment decisions with endogenous r…
We aim to provide an intertemporal, cost-efficient consumption model that extends the consumption optimization inspired by the Distribution Builder, a tool developed by Sharpe, Johnson, and Goldstein. The Distribution Builder enables the…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
We consider a real options model for the optimal irreversible investment problem of a profit maximizing company. The company has the opportunity to invest into a production plant capable of producing two products, of which the prices follow…
An important question in economics is how people choose between different payments in the future. The classical normative model predicts that a decision maker discounts a later payment relative to an earlier one by an exponential function…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…
In this paper, we focus on the problem of optimal portfolio-consumption policies in a multi-asset financial market, where the n risky assets follow Exponential Ornstein-Uhlenbeck processes, along with one risk-free bond. The investor's…
This paper investigates the interactions among consumption/savings, investment, and retirement choices with income disaster. We consider low-income people who are exposed to income disaster so that they retire involuntarily when income…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
We provide a detailed characterization of the optimal consumption stream for the additive habit-forming utility maximization problem, in a framework of general discrete-time incomplete markets and random endowments. This characterization…
This paper develops theoretical criteria and econometric methods to rank policy interventions in terms of welfare when individuals are loss-averse. Our new criterion for "loss aversion-sensitive dominance" defines a weak partial ordering of…
We investigate the ergodic problem of growth-rate maximization under a class of risk constraints in the context of incomplete, It\^{o}-process models of financial markets with random ergodic coefficients. Including {\em value-at-risk}…
The paper investigates the consumption-investment problem for an investor with Epstein-Zin utility in an incomplete market. A non-Markovian environment with unbounded parameters is considered, which is more realistic in practical financial…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
Monetary risk measures are usually interpreted as the smallest amount of external capital that must be added to a financial position to make it acceptable. We propose a new concept: intrinsic risk measures and argue that this approach…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
Two critical questions about intergenerational outcomes are: one, whether significant barriers or traps exist between different social or economic strata; and two, the extent to which intergenerational outcomes do (or can be used to) affect…
We consider the life-cycle optimal portfolio choice problem faced by an agent receiving labor income and allocating her wealth to risky assets and a riskless bond subject to a borrowing constraint. In this paper, to reflect a realistic…
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.…
We establish a Nash equilibrium in a market with $ N $ agents with the performance criteria of relative wealth level when the market return is unobservable. Each investor has a random prior belief on the return rate of the risky asset. The…