Related papers: Non-diversified portfolios with subjective expecte…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
In dynamic programming and reinforcement learning, the policy for the sequential decision making of an agent in a stochastic environment is usually determined by expressing the goal as a scalar reward function and seeking a policy that…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios'…
In many risk-aware and multi-objective reinforcement learning settings, the utility of the user is derived from the single execution of a policy. In these settings, making decisions based on the average future returns is not suitable. For…
We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility…
Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…
We consider non-concave and non-smooth random utility functions with do- main of definition equal to the non-negative half-line. We use a dynamic pro- gramming framework together with measurable selection arguments to establish both the…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
Optimization of distortion riskmetrics with distributional uncertainty has wide applications in finance and operations research. Distortion riskmetrics include many commonly applied risk measures and deviation measures, which are not…
I study robust comparative statics for risk-averse subjective expected utility (SEU) maximizers. Starting with a finite menu of actions totally ordered by sensitivity to risk, I identify the transformations of her menu that lead a…
Cryptocurrencies (CCs) have risen rapidly in market capitalization over the last years. Despite striking price volatility, their high average returns have drawn attention to CCs as alternative investment assets for portfolio and risk…
Active search is a setting in adaptive experimental design where we aim to uncover members of rare, valuable class(es) subject to a budget constraint. An important consideration in this problem is diversity among the discovered targets --…
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
Consider the object allocation (one-sided matching) model of Shapley and Scarf (1974). When final allocations are observed but agents' preferences are unknown, when might the allocation be in the core? This is a one-sided analogue of the…
I conduct Rabin's (2000) calibration exercise in the subjective expected utility realm. I show that the rejection of some risky bet by a risk-averse agent only implies the rejection of more extreme and less desirable bets and nothing more.
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…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
This paper will examine a model with many agents, each of whom has a different belief about the dynamics of a risky asset. The agents are Bayesian and so learn about the asset over time. All agents are assumed to have a finite (but random)…