Related papers: Dynamic portfolio selection under generalized disa…
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…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
We present stability conditions for deterministic time-varying nonlinear discrete-time systems whose inputs aim to minimize an infinite-horizon time-dependent cost. Global asymptotic and exponential stability properties for general…
We consider the problem of choosing an optimal portfolio, assuming the asset returns have a Gaussian mixture (GM) distribution, with the objective of maximizing expected exponential utility. In this paper we show that this problem is…
In this paper, we consider a continuous-time mean-variance portfolio selection with regime-switching and random horizon. Unlike previous works, the dynamic of assets are described by non-Markovian regime-switching models in the sense that…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
The problem of estimation error in portfolio optimization is discussed, in the limit where the portfolio size N and the sample size T go to infinity such that their ratio is fixed. The estimation error strongly depends on the ratio N/T and…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…
One of the crucial problems in mathematical finance is to mitigate the risk of a financial position by setting up hedging positions of eligible financial securities. This leads to focusing on set-valued maps associating to any financial…
Robust optimization provides a principled framework for decision-making under uncertainty, with broad applications in finance, engineering, and operations research. In portfolio optimization, uncertainty in expected returns and covariances…
We consider the dividend maximization problem including a ruin penalty in a diffusion environment. The additional penalty term is motivated by a constraint on dividend strategies. Intentionally, we use different discount rates for the…
We study the dynamic indifference pricing with ambiguity preferences. For this, we introduce the dynamic expected utility with ambiguity via the nonlinear expectation--G-expectation, introduced by Peng (2007). We also study the risk…
We consider a generalization of the recursive utility model by adding a new component that represents utility of investment gains and losses. We also study the utility process in this generalized model with constant elasticity of…
In this paper, we study a class of stochastic time-inconsistent linear-quadratic (LQ) control problems with control input constraints. These problems are investigated within the more general framework associated with random coefficients.…
We study the connection between risk aversion, number of consumers and uniqueness of equilibrium. We consider an economy with two goods and $c$ impatience types, where each type has additive separable preferences with HARA Bernoulli utility…
This paper characterizes differentiable and subgame Markov perfect equilibria in a continuous time intertemporal decision problem with non-constant discounting. Capturing the idea of non commitment by letting the commitment period being…
We construct Nash-equilibria in mean-field portfolio games of optimal investment and hedging under relative performance concerns with exponential (CARA) utility preferences. Common noise dynamics are modeled by integer-valued random…
This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the…
Under non-exponential discounting, we develop a dynamic theory for stopping problems in continuous time. Our framework covers discount functions that induce decreasing impatience. Due to the inherent time inconsistency, we look for…