Related papers: Merton's Problem with Recursive Perturbed Utility
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
Motivated by the trade-off between exploitation and exploration in reinforcement learning, we study a continuous-time entropy-regularized mean variance portfolio selection problem in the presence of jumps. We propose an exploratory SDE for…
This paper investigates the optimal selection of portfolios for power utility maximizing investors in a financial market where stock returns depend on a hidden Gaussian mean reverting drift process. Information on the drift is obtained from…
Utility preference robust optimization (PRO) has recently been proposed to deal with optimal decision making problems where the decision maker's (DM) preference over gains and losses is ambiguous. In this paper, we take a step further to…
We study optimal stopping for diffusion processes with unknown model primitives within the continuous-time reinforcement learning (RL) framework developed by Wang et al. (2020), and present applications to option pricing and portfolio…
This paper presents a new framework for Merton's optimal investment problem which uses the theory of Meyer $\sigma$-fields to allow for signals that possibly warn the investor about impending jumps. With strategies no longer predictable,…
We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…
This paper compares the optimal investment problems based on monotone mean-variance (MMV) and mean-variance (MV) preferences in the L\'{e}vy market with an untradable stochastic factor. It is an open question proposed by Trybu{\l}a and…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
We present a reinforcement learning (RL) approach for robust optimisation of risk-aware performance criteria. To allow agents to express a wide variety of risk-reward profiles, we assess the value of a policy using rank dependent expected…
In this paper, we propose a new class of optimization problems, which maximize the terminal wealth and accumulated consumption utility subject to a mean variance criterion controlling the final risk of the portfolio. The multiple-objective…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
Merton portfolio management problem is studied in this paper within a stochastic volatility, non constant time discount rate, and power utility framework. This problem is time inconsistent and the way out of this predicament is to consider…
We consider classical Merton problem of terminal wealth maximization in finite horizon. We assume that the drift of the stock is following Ornstein-Uhlenbeck process and the volatility of it is following GARCH(1) process. In particular,…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
We study a utility maximization problem in a financial market with a stochastic drift process, combining a worst-case approach with filtering techniques. Drift processes are difficult to estimate from asset prices, and at the same time…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
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 consider a financial market with a stock exposed to a counterparty risk inducing a drop in the price, and which can still be traded after this default time. We use a default-density modeling approach, and address in this incomplete…