Related papers: An extended Merton problem with relaxed benchmark …
We analyze the problem of optimal reduction of the debt-to-GDP ratio in a stochastic control setting. The debt-to-GDP dynamics are modeled through a stochastic differential equation in which fiscal policy simultaneously affects both debt…
We show how a stochastic version of the Lagrange multiplier method can be combined with the stochastic maximum principle for jump diffusions to solve certain constrained stochastic optimal control problems. Two different terminal…
This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and stochastic differential utility. For Epstein-Zin utility, duality between the primal and dual problems is…
We consider a class of two-sided singular control problems. A controller either increases or decreases a given spectrally negative Levy process so as to minimize the total costs comprising of the running and control costs where the latter…
This paper examines a Markovian model for the optimal irreversible investment problem of a firm aiming at minimizing total expected costs of production. We model market uncertainty and the cost of investment per unit of production capacity…
We present a brief overview of random matrix theory (RMT) with the objectives of highlighting the computational results and applications in financial markets as complex systems. An oft-encountered problem in computational finance is the…
In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…
In this paper we study a risk-minimizing hedging problem for a semimartingale incomplete financial market where d+1 assets are traded continuously and whose price is expressed in units of the num\'{e}raire portfolio. According to the…
This paper studies a life-time consumption-investment problem under the Black-Scholes framework, where the consumption rate is subject to a lower bound constraint that linearly depends on her wealth. It is a stochastic control problem with…
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…
In this paper, we undertake an investigation into the utility maximization problem faced by an economic agent who possesses the option to switch jobs, within a scenario featuring the presence of a mandatory retirement date. The agent needs…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We study the finite horizon Merton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal…
By the classical Martingale Representation Theorem, replication of random vectors can be achieved via stochastic integrals or solutions of stochastic differential equations. We introduce a new approach to replication of random vectors via…
The Skorokhod embedding problem aims to represent a given probability measure on the real line as the distribution of Brownian motion stopped at a chosen stopping time. In this paper, we consider an extension of the optimal Skorokhod…
In this paper we study the problem of maximizing expected utility from the terminal wealth with proportional transaction costs and random endowment. In the context of the existence of consistent price systems, we consider the duality…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…
Motivated by optimal execution with stochastic signals, market impact and constraints in financial markets, and optimal storage management in commodity markets, we formulate and solve an optimal trading problem with a general propagator…
Aiming for more realistic optimal dividend policies, we consider a stochastic control problem with linearly bounded control rates using a performance function given by the expected present value of dividend payments made up to ruin. In a…
We study the problem of optimally managing an inventory with unknown demand trend. Our formulation leads to a stochastic control problem under partial observation, in which a Brownian motion with non-observable drift can be singularly…