Related papers: Decision-making under risk: when is utility maximi…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
We study a non-concave optimization problem in which a financial company maximizes the expected utility of the surplus under a risk-based regulatory constraint. For this problem, we consider four different prevalent risk constraints…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
Classic decision-theory is based on the maximum expected utility (MEU) principle, but crucially ignores the resource costs incurred when determining optimal decisions. Here we propose an axiomatic framework for bounded decision-making that…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…
We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We propose a new class of monetary risk measures for assessing financial and ESG risk. The construction is based on classical shortfall risk measures with loss function replaced by a multi-attribute utility function. We present an extensive…
We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
The existence of optimal strategy in robust utility maximization is addressed when the utility function is finite on the entire real line. A delicate problem in this case is to find a "good definition" of admissible strategies, so that an…
This paper studies an $\alpha$-robust utility maximization problem where an investor faces an intractable claim -- an exogenous contingent claim with known marginal distribution but unspecified dependence structure with financial market…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
Data-driven decision making plays an important role even in high stakes settings like medicine and public policy. Learning optimal policies from observed data requires a careful formulation of the utility function whose expected value is…