Related papers: Equilibrium Investment with Random Risk Aversion: …
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
A framework for risk-averse optimization problems is introduced that is resilient to ambiguities in the true form of the underlying probability distribution. The focus is on problems with partial differential equations (PDEs) as…
In this paper, we continue our study on a general time-inconsistent stochastic linear--quadratic (LQ) control problem originally formulated in [6]. We derive a necessary and sufficient condition for equilibrium controls via a flow of…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We develop a framework for convexifying a fairly general class of optimization problems. Under additional assumptions, we analyze the suboptimality of the solution to the convexified problem relative to the original nonconvex problem and…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic…
Prior work on safe Reinforcement Learning (RL) has studied risk-aversion to randomness in dynamics (aleatory) and to model uncertainty (epistemic) in isolation. We propose and analyze a new framework to jointly model the risk associated…
This paper bridges reinforcement learning (RL) and risk-sensitive stochastic control by introducing a tractable exploration mechanism for policy search in risk-sensitive portfolio management, with known and unknown model parameters, that…
Expected Shortfall (ES, also known as CVaR) is the most important coherent risk measure in finance, insurance, risk management, and engineering. Recently, Wang and Zitikis (2021) put forward four economic axioms for portfolio risk…
The term rational has become synonymous with maximizing expected payoff in the definition of the best response in Nash setting. In this work, we consider stochastic games in which players engage only once, or at most a limited number of…
This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
We consider simple stochastic games with terminal-node rewards and multiple players, who have differing perceptions of risk. Specifically, we study risk-sensitive equilibria (RSEs), where no player can improve their perceived reward --…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
We study the feasibility and noise sensitivity of portfolio optimization under some downside risk measures (Value-at-Risk, Expected Shortfall, and semivariance) when they are estimated by fitting a parametric distribution on a finite sample…