Related papers: Reference-dependent asset pricing with a stochasti…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments;…
We introduce a utility-driven bounded-confidence model of opinion dynamics in which opinions associated with higher utility exert stronger social influence. In the regime where all agents belong to a single opinion cluster, we derive a…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
Rewards typically express desirabilities or preferences over a set of alternatives. Here we propose that rewards can be defined for any probability distribution based on three desiderata, namely that rewards should be real-valued, additive…
We study consumption dependence in the context of random utility and repeated choice. We show that, in the presence of consumption dependence, the random utility model is a misspecified model of repeated rational choice. This…
In this paper, we consider the problem of maximizing the expected discounted utility of dividend payments for an insurance company that controls risk exposure by purchasing proportional reinsurance. We assume the preference of the insurer…
This paper analyzes single-item continuous-review inventory models with random supplies in which the inventory dynamic between orders is described by a diffusion process, and a long-term average cost criterion is used to evaluate decisions.…
This memoir presents a systematic study of the utility maximization problem of an investor in a constrained and unbounded financial market. Building upon the work of Hu et al. (2005) [Ann. Appl. Probab., 15, 1691--1712] in a bounded…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
We consider "time-of-use" pricing as a technique for matching supply and demand of temporal resources with the goal of maximizing social welfare. Relevant examples include energy, computing resources on a cloud computing platform, and…
Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…
The standard Hotelling model assumes that the stock of an exhaustible resource is known. We expand on the model by Arrow and Chang that introduced stochastic discoveries and for the first time completely solve such a model using impulse…
We extend well-known comparative results under expected utility to models of non-expected utility by providing novel conditions on local utility functions. We illustrate how our results parallel, and are distinct from, existing results for…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
We propose a projected gradient dynamical system as a model for a bargaining scheme for an asset for which the two interested agents have personal valuations which do not initially coincide. The personal valuations are formed using…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We propose a model for equity trading in a population of agents where each agent acts to achieve his or her target stock-to-bond ratio, and, as a feedback mechanism, follows a market adaptive strategy. In this model only a fraction of…