Related papers: Decision-making under risk: when is utility maximi…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
A fundamental problem in risk management is the robust aggregation of different sources of risk in a situation where little or no data are available to infer information about their dependencies. A popular approach to solving this problem…
This paper examines the optimal annuitization, investment and consumption strategies of a utility-maximizing retiree facing a stochastic time of death under a variety of institutional restrictions. We focus on the impact of aging on the…
Reliability (survival analysis, to biostatisticians) is a key ingredient for mak- ing decisions that mitigate the risk of failure. The other key ingredient is utility. A decision theoretic framework harnesses the two, but to invoke this…
This paper studies decision problems where the decision maker's choice of action affects the probability distribution of a payoff relevant random variable. We establish sufficient conditions for the existence of an expected utility…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
We give explicit solutions for utility maximization of terminal wealth problem $u(X_T)$ in the presence of Knightian uncertainty in continuous time $[0,T]$ in a complete market. We assume there is uncertainty on both drift and volatility of…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
Although maximizing median and quantiles is intuitively appealing and has an axiomatic foundation, it is difficult to study the optimal portfolio strategy due to the discontinuity and time inconsistency in the objective function. We use the…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
In the present paper, the primal-dual problem consisting of the investment risk minimization problem and the expected return maximization problem in the mean-variance model is discussed using replica analysis. As a natural extension of the…
We study a robust maximization problem from terminal wealth and consumption under a convex constraints on the portfolio. We state the existence and the uniqueness of the consumption-investment strategy by studying the associated quadratic…
Aggregating risks from multiple sources can be complex and demanding, and decision makers usually adopt heuristics to simplify the evaluation process. This paper axiomatizes two closed related and yet different heuristics, narrow bracketing…
We obtain an elementary characterization of expected utility based on a representation of choice in terms of psychological gambles, which requires no assumption other than coherence between ex-ante and ex-post preferences. Weaker version of…
The increasing penetration of renewable generation and distributed energy resources requires new operating practices for power systems, wherein risk is explicitly quantified and managed. However, traditional risk-assessment frameworks are…
This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously…
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…