Related papers: Cost-efficiency in Incomplete Markets

According to common understanding, in free completion of a private product, market and price, the two main factors in the competition that leads to economic efficiency, always exist together. This paper, however, points out the phenomenon…

This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously…

We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…

Allocating conflicting jobs among individuals while respecting a budget constraint for each individual is an optimization problem that arises in various real-world scenarios. In this paper, we consider the situation where each individual…

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 a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…

The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…

This paper is the continuation of "Pricing with coherent risk" and deals with further applications of coherent risk measures to problems of finance. First, we study the optimization problem. Three forms of this problem are considered.…

We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…

Since Choo and Siow (2006), a burgeoning literature has analyzed matching markets when utility is perfectly transferable and the joint surplus is separable. We take stock of recent methodological developments in this area. Combining…

The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…

The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…

This paper is a continuation of Ishitani and Kato (2015), in which we derived a continuous-time value function corresponding to an optimal execution problem with uncertain market impact as the limit of a discrete-time value function. Here,…

We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…

This paper studies finite-time optimal consumption-investment problems with power, logarithmic and exponential utilities, in a regime switching market with random coefficients, subject to coupled constraints on the consumption and…

This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…

We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…

Matching markets play a prominent role in economic theory. A prime example of such a market is the sponsored search market. Here, as in other markets of that kind, market equilibria correspond to feasible, envy free, and bidder optimal…

We seek to deepen understanding of the micro-foundations of institutionalization while contributing to a sociological theory of markets by investigating the puzzle of price bubbles in financial markets. We find that such markets, despite…

This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…