Related papers: Equilibrium Portfolio Selection for Smooth Ambigui…
The purpose of this work is to explore the role that random arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a…
In this paper, we study closed-loop equilibrium strategies for mean-variance portfolio selection problem in a hidden Markov model with dynamic attention behavior. In addition to the investment strategy, the investor's attention to news is…
This paper investigates the optimal selection of portfolios for power utility maximizing investors in a financial market where stock returns depend on a hidden Gaussian mean reverting drift process. Information on the drift is obtained from…
Bayesian optimization is a coherent, ubiquitous approach to decision-making under uncertainty, with applications including multi-arm bandits, active learning, and black-box optimization. Bayesian optimization selects decisions (i.e.…
The timing of strategic exit is one of the most important but difficult business decisions, especially under competition and uncertainty. Motivated by this problem, we examine a stochastic game of exit in which players are uncertain about…
One of the crucial problems in mathematical finance is to mitigate the risk of a financial position by setting up hedging positions of eligible financial securities. This leads to focusing on set-valued maps associating to any financial…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
Portfolio construction is the science of balancing reward and risk; it is at the core of modern finance. In this paper, we tackle the question of optimal decision-making within a Bayesian paradigm, starting from a decision-theoretic…
In this paper, we study the mean-variance portfolio selection problem under partial information with drift uncertainty. First we show that the market model is complete even in this case while the information is not complete and the drift is…
We develop a hierarchical Bayesian dynamic game for competitive inventory and pricing under incomplete information. Two firms repeatedly choose order quantities and prices while facing two layers of uncertainty: unknown market demand and…
We introduce a solution concept for extensive-form games of incomplete information in which players need not assign likelihoods to what they do not know about the game. This is embedded in a model in which players can hold multiple priors.…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
The monotone mean-variance (MMV) preference proposed by Maccheroni, et al. (Math. Finance 19(3): 487-521, 2009) fails to differentiate strictly dominant payoffs, which may cause inconsistency in portfolio decision-making. This paper…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both the drift and volatility of the driving process. At a technical level, the analysis requires a…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
The problem of allocating scarce items to individuals is an important practical question in market design. An increasingly popular set of mechanisms for this task uses the concept of market equilibrium: individuals report their preferences,…
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…