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This paper investigates the investment behaviour of a large unregulated financial institution (FI) with CARA risk preferences. It shows how the FI optimizes its trading to account for market illiquidity using an extension of the…
Motivated by the analysis of a general optimal portfolio selection problem, which encompasses as special cases an optimal consumption and an optimal debt-arrangement problem, we are concerned with the questions of how a personality trait…
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…
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…
Long term optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal…
In this paper, we study the problem of expected utility maximization of an agent who, in addition to an initial capital, receives random endowments at maturity. Contrary to previous studies, we treat as the variables of the optimization…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
This study investigates an optimal investment problem for an insurance company operating under the Cramer-Lundberg risk model, where investments are made in both a risky asset and a risk-free asset. In contrast to other literature that…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
We study utility maximization for power utility random fields with and without intermediate consumption in a general semimartingale model with closed portfolio constraints. We show that any optimal strategy leads to a solution of the…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
We consider a semilinear equation linked to the finite horizon consumption - investment problem under the stochastic factor framework and we prove it admits a classical solution and provide all obligatory estimates to successfully apply a…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…