Related papers: Reference-dependent asset pricing with a stochasti…

Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…

This paper investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded, well posedness cannot…

We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…

We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…

In order to manage peak-grid events, utilities run incentive-based demand response (DR) programs in which they offer an incentive to assets who promise to curtail power consumption, and impose penalties if they fail to do so. We develop a…

We consider a power utility maximization problem with additive habits in a framework of discrete-time markets and random endowments. For certain classes of incomplete markets, we establish estimates for the optimal consumption stream in…

We propose a new approach to utilities that is consistent with state-dependent utilities. In our model utilities reflect the level of consumption satisfaction of flows of cash in future times as they are valued when the economic agents are…

The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…

In this paper, we propose a stochastic investment model for actuarial use in South Africa by modelling price inflation rates, share dividends, long term and short-term interest rates for the period 1960-2018 and inflation-linked bonds for…

The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…

The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…

In a market with stochastic investment opportunities, we study an optimal consumption investment problem for an agent with recursive utility of Epstein-Zin type. Focusing on the empirically relevant specification where both risk aversion…

Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…

In this work we study the continuous time exponential utility maximization problem in the framework of an investor who is informed about the price changes with a delay. This leads to a non-Markovian stochastic control problem. In the case…

This paper presents an asset pricing model in an incomplete market involving a large number of heterogeneous agents based on the mean field game theory. In the model, we incorporate habit formation in consumption preferences, which has been…

The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…

We consider an individual or household endowed with an initial capital and an income, modeled as a deterministic process with a continuous drift rate. At first, we model the discounting rate as the price of a zero-coupon bond at zero under…

We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…

We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…

We explore the implications of a preference ordering for an investor-consumer with a strong preference for keeping consumption above an exogenous social norm, but who is willing to tolerate occasional dips below it. We do this by splicing…