Related papers: Nonconcave Robust Utility Maximization under Proje…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
We study a robust maximization problem from terminal wealth and consumption under a convex constraints on the portfolio. We state the existence and the uniqueness of the consumption-investment strategy by studying the associated quadratic…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
In the Bayesian approach to sequential decision making, exact calculation of the (subjective) utility is intractable. This extends to most special cases of interest, such as reinforcement learning problems. While utility bounds are known to…
We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
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…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We consider the problem of optimal hedging in an incomplete market with an established pricing kernel. In such a market, prices are uniquely determined, but perfect hedges are usually not available. We work in the rather general setting of…
We calculate explicitly the optimal strategy for an investor with exponential utility function when the stock price follows an autoregressive Gaussian process. We also calculate its performance and analyse it when the trading horizon tends…
We consider the problem of utility maximization with exponential preferences in a market where the traded stock/risky asset price is modelled as a L\'evy-driven pure jump process (i.e. the driving L\'evy process has no Brownian component).…
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
A celebrated financial application of convex duality theory gives an explicit relation between the following two quantities: (i) The optimal terminal wealth $X^*(T) : = X_{\varphi^*}(T)$ of the problem to maximize the expected $U$-utility…
We offer mathematical tractability and new insights for a framework of exponential utility with non-negative consumption, a constraint often omitted in the literature giving rise to economically unviable solutions. Specifically, using the…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
Distributionally robust control is a well-studied framework for optimal decision making under uncertainty, with the objective of minimizing an expected cost function over control actions, assuming the most adverse probability distribution…
This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We consider the classical multi-asset Merton investment problem under drift uncertainty, i.e. the asset price dynamics are given by geometric Brownian motions with constant but unknown drift coefficients. The investor assumes a prior drift…
The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate…