Related papers: PSAHARA Utility Family: Modeling Non-monotone Risk…
We propose a general family of piecewise hyperbolic absolute risk aversion (PHARA) utilities, including many classic and non-standard utilities as examples. A typical application is the composition of a HARA preference and a piecewise…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
We develop a novel five-component decomposition of optimal dynamic portfolio choice, which reveals the simultaneous impacts from market incompleteness and wealth-dependent utilities. Under the HARA utility and a nonrandom interest rate, we…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
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…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
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…
We develop a dual-control method for approximating investment strategies in incomplete environments that emerge from the presence of trading constraints. Convex duality enables the approximate technology to generate lower and upper bounds…
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…
This paper focuses on finding approximate solutions to stochastic optimal control problems with control domains being not necessarily convex, where the state trajectory is subject to controlled stochastic differential equations. The…
The entropic value-at-risk (EVaR) is a new coherent risk measure, which is an upper bound for both the value-at-risk (VaR) and conditional value-at-risk (CVaR). As important properties, the EVaR is strongly monotone over its domain and…
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…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
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 solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…