Related papers: Equilibrium Investment with Random Risk Aversion: …
We consider the classical multi-asset Merton investment problem under drift uncertainty, i.e. the asset price dynamics are given by geometric Brownian motions with constant but unknown drift coefficients. The investor assumes a prior drift…
We study the single-period portfolio selection problem under Constant Relative Risk-Aversion (CRRA) utility through the information-theoretic lens. Assuming only that the market payoff vector has finite support, we show that the…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
The standard approach for constructing a Mean-Variance portfolio involves estimating parameters for the model using collected samples. However, since the distribution of future data may not resemble that of the training set, the…
In this paper, we study the robust optimal investment and risk control problem for an insurer who owns the insider information about the financial market and the insurance market under model uncertainty. Both financial risky asset process…
We examine the evolutionary basis for risk aversion with respect to aggregate risk. We study populations in which agents face choices between alternatives with different levels of aggregate risk. We show that the choices that maximize the…
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
In this paper, we explore the portfolio allocation problem involving an uncertain covariance matrix. We calculate the expected value of the Constant Absolute Risk Aversion (CARA) utility function, marginalized over a distribution of…
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
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.…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
In this paper, we consider $n$ agents who invest in a general financial market that is free of arbitrage and complete. The aim of each investor is to maximize her expected utility while ensuring, with a specified probability, that her…
This paper considers a class of stochastic control problems with implicitly defined objective functions, which are the sources of time-inconsistency. We study the closed-loop equilibrium solutions in a general controlled diffusion…
By adopting a distributional viewpoint on law-invariant convex risk measures, we construct dynamics risk measures (DRMs) at the distributional level. We then apply these DRMs to investigate Markov decision processes, incorporating latent…
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs…