Related papers: Decision-making under risk: when is utility maximi…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show…
In this note, we explicitly solve the problem of maximizing utility of consumption (until the minimum of bankruptcy and the time of death) with a constraint on the probability of lifetime ruin, which can be interpreted as a risk measure on…
We examine behavioral axioms in decision theory that are satisfied approximately rather than exactly. We demonstrate that in key domains -- decisions under risk, uncertainty, and intertemporal choice -- behavior that \emph{almost} satisfies…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
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…
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…
We investigate optimal consumption and investment problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall. We formulate various utility maximization problems, which can be solved explicitly. We…
In this paper we find tight sufficient conditions for the continuity of the value of the utility maximization problem from terminal wealth with respect to the convergence in distribution of the underlying processes. We also establish a weak…
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…
We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
We investigate optimal consumption problems for a Black-Scholes market under uniform restrictions on Value-at-Risk and Expected Shortfall for logarithmic utility functions. We find the solutions in terms of a dynamic strategy in explicit…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…