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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…
The optimization of the variance supplemented by a budget constraint and an asymmetric $\ell_1$ regularizer is carried out analytically by the replica method borrowed from the theory of disordered systems. The asymmetric regularizer allows…
A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing…
Recently noticed ability of restart to reduce the expected completion time of first-passage processes allows appealing opportunities for performance improvement in a variety of settings. However, complex stochastic processes often exhibit…
Much work in the parimutuel betting literature has discussed estimating event outcome probabilities or developing optimal wagering strategies, particularly for horse race betting. Some betting pools, however, involve betting not just on a…
The problem of portfolio allocation in the context of stocks evolving in random environments, that is with volatility and returns depending on random factors, has attracted a lot of attention. The problem of maximizing a power utility at a…
We study a problem of finding an optimal stopping strategy to liquidate an asset with unknown drift. Taking a Bayesian approach, we model the initial beliefs of an individual about the drift parameter by allowing an arbitrary probability…
Multi-round competitions often double or triple the points awarded in the final round, calling it a bonus, to maximize spectators' excitement. In a two-player competition with $n$ rounds, we aim to derive the optimal bonus size to maximize…
Signals coming from multivariate higher order conditional moments as well as the information contained in exogenous covariates, can be effectively exploited by rational investors to allocate their wealth among different risky investment…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
This paper develops upper and lower bounds for the probability of Boolean functions by treating multiple occurrences of variables as independent and assigning them new individual probabilities. We call this approach dissociation and give an…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
This paper presents numerical algorithm and results for pricing a capital protection option offered by many asset managers for investment portfolios to take advantage of market growth and protect savings. Under optimal withdrawal…
We find the optimal indemnity to maximize the expected utility of terminal wealth of a buyer of insurance whose preferences are modeled by an exponential utility. The insurance premium is computed by a convex functional. We obtain a…
Phased releases are a common strategy in the technology industry for gradually releasing new products or updates through a sequence of A/B tests in which the number of treated units gradually grows until full deployment or deprecation.…
Insurance losses due to flooding can be estimated by simulating and then summing losses over a large number of locations and a large set of hypothetical years of flood events. Replicated realisations lead to Monte Carlo return-level…
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs…
In this paper we consider a scenario where there are several algorithms for solving a given problem. Each algorithm is associated with a probability of success and a cost, and there is also a penalty for failing to solve the problem. The…
We perform a detailed theoretical study of the value of a class of participating policies with four key features: $(i)$ the policyholder is guaranteed a minimum interest rate on the policy reserve; $(ii)$ the contract can be terminated by…