Related papers: Non-diversified portfolios with subjective expecte…
Asset allocation is an investment strategy that aims to balance risk and reward by constantly redistributing the portfolio's assets according to certain goals, risk tolerance, and investment horizon. Unfortunately, there is no simple…
This paper investigates the equilibrium portfolio selection for smooth ambiguity preferences in a continuous-time market. The investor is uncertain about the risky asset's drift term and updates the subjective belief according to the…
Sharpe et al. proposed the idea of having an expected utility maximizer choose a probability distribution for future wealth as an input to her investment problem instead of a utility function. They developed a computer program, called The…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Each individual investor is different, with different financial goals, different levels of risk tolerance and different personal preferences. From the point of view of investment management, these characteristics are often defined as…
We study continuous-time portfolio choice with nonlinear payoffs under smooth ambiguity and Bayesian learning. We develop a general framework for dynamic, non-concave asset allocation that accommodates nonlinear payoffs, broad utility…
An investor is estimating net present value of a firm project and performs risk analysis. Usually it is created portfolio hierarchies and make comparison of variants of project based on these hierarchies. Then one finds that portfolio which…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
We analyze a negative-parameter variant of the diversity-weighted portfolio studied by Fernholz, Karatzas, and Kardaras (Finance Stoch 9(1):1-27, 2005), which invests in each company a fraction of wealth inversely proportional to 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…
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…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
Risk diversification is one of the dominant concerns for portfolio managers. Various portfolio constructions have been proposed to minimize the risk of the portfolio under some constrains including expected returns. We propose a portfolio…
Decision-theoretic planning with risk-sensitive planning objectives is important for building autonomous agents or decision-support systems for real-world applications. However, this line of research has been largely ignored in the…
Protecting against cyber-threats is vital for every organization and can be done by investing in cybersecurity controls and purchasing cyber insurance. However, these are interlinked since insurance premiums could be reduced by investing…
We treat a fairly broad class of financial models which includes markets with proportional transaction costs. We consider an investor with cumulative prospect theory preferences and a non-negativity constraint on portfolio wealth. The…
Specialization and diversification are two major strategies that complex systems might exploit. Given a fixed amount of resources, the question is whether to invest this in elements that respond in a correlated manner to external…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…