Related papers: Non-diversified portfolios with subjective expecte…

We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…

We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…

We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…

We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…

We provide and axiomatize a representation for preferences over lotteries that generalizes the expected utility model. Since the representation uses different utility functions to evaluate different lotteries, the preferences can be…

In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…

A monopolist sells goods with possibly a characteristic consumers dislike (for instance, he sells random goods to risk averse agents), which does not affect the production costs. We investigate the question whether using undesirable goods…

This work proposes a unified framework for portfolio allocation, covering both asset selection and optimization, based on a multiple-hypothesis predict-then-optimize approach. The portfolio is modeled as a structured ensemble, where each…

This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…

For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…

Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…

A new framework for portfolio diversification is introduced which goes beyond the classical mean-variance approach and portfolio allocation strategies such as risk parity. It is based on a novel concept called portfolio dimensionality that…

We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…

This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…

We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test the proposed reward-risk parity strategies and compare their performance with…

We consider a Bayesian financial market with one bond and one stock where the aim is to maximize the expected power utility from terminal wealth. The solution of this problem is known, however there are some conjectures in the literature…

This paper is concerned with the uniqueness issue of open-loop equilibrium investment strategies of dynamic mean-variance portfolio selection problems with random coefficients. A unified method is developed to treat both the problems with…

We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…

We consider the problem of belief aggregation: given a group of individual agents with probabilistic beliefs over a set of uncertain events, formulate a sensible consensus or aggregate probability distribution over these events. Researchers…

This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…