Related papers: Optimal Diversification and Leverage in a Utility-…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
In this paper, we revisit the relationship between investors' utility functions and portfolio allocation rules. We derive portfolio allocation rules for asymmetric Laplace distributed $ALD(\mu,\sigma,\kappa)$ returns and compare them with…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…
This paper considers a utility maximization and optimal asset allocation problem in the presence of a stochastic endowment that cannot be fully hedged through trading in the financial market. After studying continuity properties of the…
Prompted by a recent experiment by Victor Haghani and Richard Dewey, this note generalises the Kelly strategy (optimal for simple investment games with log utility) to a large class of practical utility functions and including the effect of…
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 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…
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…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
This paper considers the mean variance portfolio management problem. We examine portfolios which contain both primary and derivative securities. The challenge in this context is due to portfolio's nonlinearities. The delta-gamma…
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his…
We study optimal portfolio choice under Epstein-Zin recursive utility in the presence of general leverage constraints. We first establish that the optimal value function is the unique viscosity solution to the associated…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
This paper studies a portfolio allocation problem, where the goal is to prescribe the wealth distribution at the final time. We study this problem with the tools of optimal mass transport. We provide a dual formulation which we solve by a…
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…
We develop a novel five-component decomposition of optimal dynamic portfolio choice, which reveals the simultaneous impacts from market incompleteness and wealth-dependent utilities. Under the HARA utility and a nonrandom interest rate, we…
We present a method for constructing the log-optimal portfolio using the well-calibrated forecasts of market values. Dawid's notion of calibration and the Blackwell approachability theorem are used for computing well-calibrated forecasts.…