Related papers: Robust forward investment and consumption under dr…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
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…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…
In this paper, a robust optimal reinsurance-investment problem with delay is studied under the $\alpha$-maxmin mean-variance criterion. The surplus process of an insurance company approximates Brownian motion with drift. The financial…
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…
Robust optimization methods have shown practical advantages in a wide range of decision-making applications under uncertainty. Recently, their efficacy has been extended to multi-period settings. Current approaches model uncertainty either…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
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 an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
We study the problem of optimally managing an inventory with unknown demand trend. Our formulation leads to a stochastic control problem under partial observation, in which a Brownian motion with non-observable drift can be singularly…
Robust planning in interactive scenarios requires predicting the uncertain future to make risk-aware decisions. Unfortunately, due to long-tail safety-critical events, the risk is often under-estimated by finite-sampling approximations of…
Strategies aimed at reducing the negative effects of long-term uncertainty and risk are common in biology, game theory, and finance, even if they entail a cost in terms of mean benefit. Here, we focus on the single mutant's invasion of a…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
In this paper we study a rational inattention model in environments where the decision maker faces uncertainty about the true prior distribution over states. The decision maker seeks to select a stochastic choice rule over a finite set of…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
We consider the problem of maximizing the asymptotic growth rate of an investor under drift uncertainty in the setting of stochastic portfolio theory (SPT). As in the work of Kardaras and Robertson we take as inputs (i) a Markovian…
In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…