Related papers: Smoothness of the Value Function for Optimal Consu…
This paper studies an optimal consumption problem with both relaxed benchmark tracking and consumption drawdown constraint, leading to a stochastic control problem with dynamic state-control constraints. In our relaxed tracking formulation,…
This paper solves the problem of optimal dynamic consumption, investment, and healthcare spending with isoelastic utility, when natural mortality grows exponentially to reflect Gompertz' law and investment opportunities are constant.…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
This paper examines a continuous time intertemporal consumption and portfolio choice problem with a stochastic differential utility preference of Epstein-Zin type for a robust investor, who worries about model misspecification and seeks…
We address the problem of making a managerial decision when the investment project is subsidized, which results in the resolution of an infinite-horizon optimal stopping problem of a switching diffusion driven by either an homogeneous or an…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
In this paper, we investigate a portfolio selection problem with transaction costs under a two-factor stochastic volatility structure, where volatility follows a mean-reverting process with a stochastic mean-reversion level. The model…
We discuss an optimal investment, consumption and insurance problem of a wage earner under inflation. Assume a wage earner investing in a real money account and three asset prices, namely: a real zero coupon bond, the inflation-linked real…
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…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
We study an optimal control problem encompassing investment, consumption, and retirement decisions under exponential (CARA-type) utility. The financial market comprises a bond with constant drift and a stock following geometric Brownian…
We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
We consider a problem of optimal investment with intermediate consumption in the framework of an incomplete semimartingale model of a financial market. We show that a necessary and sufficient condition for the validity of key assertions of…
We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…
State-of-the-art approaches to optimal control use smooth approximations of value and policy functions and gradient-based algorithms for improving approximator parameters. Unfortunately, we show that value and policy functions that arise in…
We consider a variation on the classical finance problem of optimal portfolio design. In our setting, a large population of consumers is drawn from some distribution over risk tolerances, and each consumer must be assigned to a portfolio of…
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…