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In this paper, we numerically address the inverse problem of identifying a time-dependent coefficient in the time-fractional diffusion equation. An a priori estimate is established to ensure uniqueness and stability of the solution. A fully…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
Managing insurance and financial risk when data is limited is a key task in the insurance industry. In this paper, we focus on cases where the risk distribution is modeled as a mixture with some components estimable to high precision or…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
This work derives an approximate analytical single period solution of the portfolio choice problem for the power utility function. It is possible to do so if we consider that the asset returns follow a multivariate normal distribution. It…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
In this paper, we solve portfolio rebalancing problem when security returns are represented by uncertain variables considering transaction costs. The performance of the proposed model is studied using constant-proportion portfolio insurance…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
This paper considers a general class of nonparametric time series regression models where the regression function can be time-dependent. We establish an asymptotic theory for estimates of the time-varying regression functions. For this…
This paper studies the properties of the optimal portfolio-consumption strategies in a {finite horizon} robust utility maximization framework with different borrowing and lending rates. In particular, we allow for constraints on both…
In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
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…
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…
The main purpose of this paper is to analyze solutions to a fully nonlinear parabolic equation arising from the problem of optimal portfolio construction. We show how the problem of optimal stock to bond proportion in the management of…
We consider the problem of seeking an optimal set of model points associated to a fixed portfolio of life insurance policies. Such an optimal set is characterized by minimizing a certain risk functional, which gauges the average discrepancy…
We study a portfolio selection problem in a continuous-time It\^o-Markov additive market with prices of financial assets described by Markov additive processes which combine L\'evy processes and regime switching models. Thus the model takes…
We discuss a class of risk-sensitive portfolio optimization problems. We consider the portfolio optimization model investigated by Nagai in 2003. The model by its nature can include fixed income securities as well in the portfolio. Under…