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Robust estimation for modern portfolio selection on a large set of assets becomes more important due to large deviation of empirical inference on big data. We propose a distributionally robust methodology for high-dimensional mean-variance…
In this paper we study a robust utility maximization problem in continuous time under model uncertainty. The model uncertainty is governed by a continuous semimartingale with uncertain local characteristics. Here, the differential…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
We consider the problem of choosing an optimal portfolio, assuming the asset returns have a Gaussian mixture (GM) distribution, with the objective of maximizing expected exponential utility. In this paper we show that this problem is…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
This paper presents how the most recent improvements made on covariance matrix estimation and model order selection can be applied to the portfolio optimisation problem. The particular case of the Maximum Variety Portfolio is treated but…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
This note discusses some of the aspects of a model for the covariance of equity returns based on a simple "isotropic" structure in which all pairwise correlations are taken to be the same value. The effect of the structure on feasible…
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…
In this paper, we consider a multi-attribute decision making problem where the decision maker's (DM's) objective is to maximize the expected utility of outcomes but the true utility function which captures the DM's risk preference is…
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
The classical dynamic programming-based optimal stochastic control methods fail to cope with nonseparable dynamic optimization problems as the principle of optimality no longer applies in such situations. Among these notorious nonseparable…
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…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
In this paper we study a time-inconsistent portfolio optimization problem for competitive agents with CARA utilities and non-exponential discounting. The utility of each agent depends on her own wealth and consumption as well as the…
In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that…
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…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…