Related papers: The Interplay between Utility and Risk in Portfoli…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
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 survey reviews portfolio selection problem for long-term horizon. We consider two objectives: (i) maximize the probability for outperforming a target growth rate of wealth process (ii) minimize the probability of falling below a target…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This paper addresses the continuous-time portfolio selection problem under generalized disappointment aversion (GDA). The implicit definition of the certainty equivalent within GDA preferences introduces time inconsistency to this problem.…
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…
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…
We consider optimal consumption and portfolio choice in the presence of Knightian uncertainty in continuous-time. We embed the problem into the new framework of stochastic calculus for such settings, dealing in particular with the issue of…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
We find the optimal investment strategy for an individual who seeks to minimize one of four objectives: (1) the probability that his wealth reaches a specified ruin level {\it before} death, (2) the probability that his wealth reaches that…
Portfolio managers often evaluate performance relative to benchmark, usually taken to be the Standard & Poor 500 stock index fund. This relative portfolio wealth is defined as the absolute portfolio wealth divided by wealth from investing…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…