Related papers: Nonconcave Robust Utility Maximization under Proje…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
A model for decision making that generalizes Expected Utility Maximization is presented. This model, Expected Qualitative Utility Maximization, encompasses the Maximin criterion. It relaxes both the Independence and the Continuity…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
We consider the problem of choosing a portfolio that maximizes the cumulative prospect theory (CPT) utility on an empirical distribution of asset returns. We show that while CPT utility is not a concave function of the portfolio weights, it…
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 utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…
This paper examines a continuous time intertemporal consumption and portfolio choice problem with a stochastic differential utility preference of Epstein-Zin type for a robust investor, who worries about model misspecification and seeks…
We study the expected utility portfolio optimization problem in an incomplete financial market where the risky asset dynamics depend on stochastic factors and the portfolio allocation is constrained to lie within a given convex set. We…
In this paper, we present two completely uncoupled algorithms for utility maximization. In the first part, we present an algorithm that can be applied for general non-concave utilities. We show that this algorithm induces a perturbed (by…
We study stability properties of the expected utility function in Bayesian optimal experimental design. We provide a framework for this problem in a non-parametric setting and prove a convergence rate of the expected utility with respect to…
We develop efficient algorithms to construct utility maximizing mechanisms in the presence of risk averse players (buyers and sellers) in Bayesian settings. We model risk aversion by a concave utility function, and players play…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
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…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
Random utility theory models an agent's preferences on alternatives by drawing a real-valued score on each alternative (typically independently) from a parameterized distribution, and then ranking the alternatives according to scores. A…