Related papers: Portfolio Optimization under Transaction Costs wit…
This paper studies the properties of discrete time stochastic optimal control problems associated with portfolio selection. We investigate if optimal continuous time strategies can be used effectively for a discrete time market after a…
This paper outlines, and through stylized examples evaluates a novel and highly effective computational technique in quantitative finance. Empirical Risk Minimization (ERM) and neural networks are key to this approach. Powerful open source…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
The geometric approach to financial markets with proportional transaction cost prescribes to imbed a specific model (of stock market, of currency market etc.), usually given in a parametric form, into a natural framework defined by the two…
For portfolio optimisation under proportional transaction costs, we provide a duality theory for general cadlag price processes. In this setting, we prove the existence of a dual optimiser as well as a shadow price process in a generalised…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
We propose a tractable dynamic framework for the joint determination of optimal consumption, portfolio choice, and healthcare irreversible investment. Our model is based on a Merton's portfolio and consumption problem, where, in addition,…
In this paper we study utility maximization with proportional transaction costs. Assuming extended weak convergence of the underlying processes we prove the convergence of the corresponding utility maximization problems. Moreover, we…
This paper is concerned with portfolio selection for an investor with exponential, power, and logarithmic utility in multi-asset financial markets allowing jumps. We investigate the classical Merton's portfolio optimization problem in a…
This paper is concerned with Merton's portfolio optimization problem in a Volterra stochastic environment described by a multivariate fake stationary Volterra--Heston model. Due to the non-Markovianity and non-semimartingality of the…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This paper studies the question of filtering and maximizing terminal wealth from expected utility in a partially information stochastic volatility models. The special features is that the only information available to the investor is the…
We study a consumption-investment problem in a multi-asset market where the returns follow a generic rank-based model. Our main result derives an HJB equation with Neumann boundary conditions for the value function and proves a…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
This paper considers the Merton portfolio management problem. We are concerned with non-exponential discounting of time and this leads to time inconsistencies of the decision maker. Following Ekeland and Pirvu 2006, we introduce the notion…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
We consider a financial market model driven by an R^n-valued Gaussian process with stationary increments which is different from Brownian motion. This driving noise process consists of $n$ independent components, and each component has…