Related papers: Merton's Problem with Recursive Perturbed Utility
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean-variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-semimartingale nature of the…
The problem of making sequential decisions in unknown probabilistic environments is studied. In cycle $t$ action $y_t$ results in perception $x_t$ and reward $r_t$, where all quantities in general may depend on the complete history. The…
The random utility model, a cornerstone in economics, is axiomatized by Falmagne (1978) and McFadden and Richter (1990) with the assumption that if a menu is observable, the choice frequencies of all alternatives are also observable.…
We study a dynamic generalization of stochastic rationality in consumer behavior, the Dynamic Random Utility Model (DRUM). Under DRUM, a consumer draws a utility function from a stochastic utility process and maximizes this utility subject…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…
In this paper, we discuss the ambiguous chance constrained based portfolio optimization problems, in which the perturbations associated with the input parameters are stochastic in nature, but their distributions are not known precisely. We…
Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…
We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
Robust machine learning formulations have emerged to address the prevalent vulnerability of deep neural networks to adversarial examples. Our work draws the connection between optimal robust learning and the privacy-utility tradeoff…
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…
This paper studies an $\alpha$-robust utility maximization problem where an investor faces an intractable claim -- an exogenous contingent claim with known marginal distribution but unspecified dependence structure with financial market…
We investigate the adaptive robust control framework for portfolio optimization and loss-based hedging under drift and volatility uncertainty. Adaptive robust problems offer many advantages but require handling a double optimization problem…