Related papers: Exact Value Solution to the Equity Premium Puzzle
We consider the problem of quantifying uncertainty over expected cumulative rewards in model-based reinforcement learning. In particular, we focus on characterizing the variance over values induced by a distribution over Markov decision…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
We propose a convex formulation for a trading system with the Conditional Value-at-Risk as a risk-adjusted performance measure under the notion of Direct Reinforcement Learning. Due to convexity, the proposed approach can uncover a…
Constrained decision-making is essential for designing safe policies in real-world control systems, yet simulated environments often fail to capture real-world adversities. We consider the problem of learning a policy that will maximize the…
This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
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…
How to hedge factor risks without knowing the identities of the factors? We first prove a general theoretical result: even if the exact set of factors cannot be identified, any risky asset can use some portfolio of similar peer assets to…
Optimizing risk-averse objectives in discounted MDPs is challenging because most models do not admit direct dynamic programming equations and require complex history-dependent policies. In this paper, we show that the risk-averse {\em total…
We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
Existing work on risk-sensitive reinforcement learning - both for symmetric and downside risk measures - has typically used direct Monte-Carlo estimation of policy gradients. While this approach yields unbiased gradient estimates, it also…
When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
We study risk-sensitive reinforcement learning in finite discounted MDPs, where a generative model of the MDP is assumed to be available. We consider a family or risk measures called the optimized certainty equivalent (OCE), which includes…
Recent theoretical results establish that time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
We study a first-order primal-dual subgradient method to optimize risk-constrained risk-penalized optimization problems, where risk is modeled via the popular conditional value at risk (CVaR) measure. The algorithm processes independent and…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…