Related papers: Dynamic portfolio selection under generalized disa…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
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…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
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…
We study the single-period portfolio selection problem under Constant Relative Risk-Aversion (CRRA) utility through the information-theoretic lens. Assuming only that the market payoff vector has finite support, we show that the…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
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 portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
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…
Portfolio management is an essential part of investment decision-making. However, traditional methods often fail to deliver reasonable performance. This problem stems from the inability of these methods to account for the unique…
In matter of Portfolio selection, we consider a generalization of the Markowitz Mean-Variance model which includes buy-in threshold constraints. These constraints limit the amount of capital to be invested in each asset and prevent very…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…