Related papers: A Note on Optimal Liquidation with Linear Price Im…
Even in the face of deteriorating and highly volatile demand, firms often invest in, rather than discard, aging technologies. In order to study this phenomenon, we model the firm's profit stream as a Brownian motion with negative drift. At…
This paper is concerned with an optimal reinsurance and investment problem for an insurance firm under the criterion of mean-variance. The driving Brownian motion and the rate in return of the risky asset price dynamic equation cannot be…
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…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman's backward recursion method, we show that the optimal strategy is to switch…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…
In this paper we consider a discrete-time risk sensitive portfolio optimization over a long time horizon with proportional transaction costs. We show that within the log-return i.i.d. framework the solution to a suitable Bellman equation…
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 consider the problem of utility maximization for investors with power utility functions. Building on the earlier work Larsen et al. (2016), we prove that the value of the problem is a Frechet-differentiable function of the drift of the…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
The fractional Brownian motion (fBm) extends the standard Brownian motion by introducing some dependence between non-overlapping increments. Consequently, if one considers for example that log-prices follow an fBm, one can exploit the…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
We analyze the consumption-portfolio selection problem of an investor facing both Brownian and jump risks. We bring new tools, in the form of orthogonal decompositions, to bear on the problem in order to determine the optimal portfolio in…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
In this paper, we propose an analytical method to compute the collateral liquidation probability in decentralized finance (DeFi) stablecoin single-collateral lending. Our approach models the collateral exchange rate as a zero-drift…