Related papers: Optimal stopping and divestment timing under scena…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We study a utility maximization problem in a financial market with a stochastic drift process, combining a worst-case approach with filtering techniques. Drift processes are difficult to estimate from asset prices, and at the same time…
The socioeconomic impact of pollution naturally comes with uncertainty due to, e.g., current new technological developments in emissions' abatement or demographic changes. On top of that, the trend of the future costs of the environmental…
Problem definition: We consider a newsvendor problem with unknown demand distribution, where we distinguish ambiguity under which the newsvendor does not differentiate demand distributions of common characteristics and misspecification…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
In this paper, we study an optimal stopping problem in the presence of model uncertainty and regime switching. The max-min formulation for robust control and the dynamic programming approach are adopted to establish a general theoretical…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…
We consider an ergodic harvesting problem with model ambiguity that arises from biology. To account for the ambiguity, the problem is constructed as a stochastic game with two players: the decision-maker (DM) chooses the `best' harvesting…
Many decision problems in economics, information technology, and industry can be transformed to an optimal stopping of adapted random vectors with some utility function over the set of Markov times with respect to filtration build by the…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
In this paper, we investigate dynamic optimization problems featuring both stochastic control and optimal stopping in a finite time horizon. The paper aims to develop new methodologies, which are significantly different from those of mixed…
We investigate the impact of Knightian uncertainty on the optimal timing policy of an ambiguity averse decision maker in the case where the underlying factor dynamics follow a multidimensional Brownian motion and the exercise payoff depends…
We consider the problem of an agent who faces losses in continuous time over a finite time horizon and may choose to share some of these losses with a counterparty. The agent is uncertain about the true loss distribution and has multiple…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
We consider risk averse investors with different levels of anxiety about asset price drawdowns. The latter is defined as the distance of the current price away from its best performance since inception. These drawdowns can increase either…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
We study the optimal placement problem of a stock trader who wishes to clear his/her inventory by a predetermined time horizon t, by using a limit order or a market order. For a diffusive market, we characterize the optimal limit order…
We present a variational free-energy formulation for distributionally robust decision-making with ambiguity in the generative model. The formulation, related to a broad range of learning and control frameworks, yields a minimax optimal…
Dybvig (1988a,b) solves in a complete market setting the problem of finding a payoff that is cheapest possible in reaching a given target distribution ("cost-efficient payoff"). In the presence of ambiguity, the distribution of a payoff is,…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…