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We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…
This paper investigates optimal portfolio strategies in a financial market where the drift of the stock returns is driven by an unobserved Gaussian mean reverting process. Information on this process is obtained from observing stock returns…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
This paper solves a consumption-investment choice problem with Epstein-Zin recursive utility under partial information--unobservable market price of risk. The main novelty is the introduction of a terminal liability constraint, a feature…
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
This paper studies stability of the exponential utility maximization when there are small variations on agent's utility function. Two settings are considered. First, in a general semimartingale model where random endowments are present, a…
We consider a stochastic optimal control problem in a market model with temporary and permanent price impact, which is related to an expected utility maximization problem under finite fuel constraint. We establish the initial condition…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
In this paper we study the problem of maximizing expected utility from the terminal wealth with proportional transaction costs and random endowment. In the context of the existence of consistent price systems, we consider the duality…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
We treat utility maximization from terminal wealth for an agent with utility function $U:\mathbb{R}\to\mathbb{R}$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the…
We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…
This study proposes a tractable stochastic choice model to identify motivations for prosocial behavior, and to explore alternative motivations of deliberate randomization beyond ex-ante fairness concerns. To represent social preferences, we…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…