Related papers: Dynamic Estimates Of The Arrow-Pratt Absolute And …
This study provides a solution of the equity premium puzzle. Questioning the validity of the Arrow-Pratt measure of relative risk aversion for detecting the risk behavior of investors under all conditions, a new tool, that is, the…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
This note will extend the research presented in Brown & Rogers (2009) to the case of CRRA agents. We consider the model outlined in that paper in which agents had diverse beliefs about the dividends produced by a risky asset. We now assume…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
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 propose a general family of piecewise hyperbolic absolute risk aversion (PHARA) utilities, including many classic and non-standard utilities as examples. A typical application is the composition of a HARA preference and a piecewise…
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
In real-world decision-making problems, for instance in the fields of finance, robotics or autonomous driving, keeping uncertainty under control is as important as maximizing expected returns. Risk aversion has been addressed in the…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
The use of Reinforcement Learning (RL) agents in practical applications requires the consideration of suboptimal outcomes, depending on the familiarity of the agent with its environment. This is especially important in safety-critical…
We study the optimal portfolio selection problem under relative performance criteria in the market model with random coefficients from the perspective of many players game theory. We consider five random coefficients which consist of three…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
Distributional reinforcement learning (RL) -- in which agents learn about all the possible long-term consequences of their actions, and not just the expected value -- is of great recent interest. One of the most important affordances of a…
Prior work on safe Reinforcement Learning (RL) has studied risk-aversion to randomness in dynamics (aleatory) and to model uncertainty (epistemic) in isolation. We propose and analyze a new framework to jointly model the risk associated…