Related papers: Merton's Problem with Recursive Perturbed Utility
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 study a robust utility maximization problem in continuous time under model uncertainty. The model uncertainty is governed by a continuous semimartingale with uncertain local characteristics. Here, the differential…
Stochastic and soft optimal policies resulting from entropy-regularized Markov decision processes (ER-MDP) are desirable for exploration and imitation learning applications. Motivated by the fact that such policies are sensitive with…
I study intertemporal hedging demand in a continuous-time multi-asset long-run risk (LRR) model under Epstein--Zin (EZ) recursive preferences. The investor trades a risk-free asset and several risky assets whose drifts and volatilities…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
An important but understudied question in economics is how people choose when facing uncertainty in the timing of events. Here we study preferences over time lotteries, in which the payment amount is certain but the payment time is…
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
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…
We propose a tractable dynamic framework for the joint determination of optimal consumption, portfolio choice, and healthcare irreversible investment. Our model is based on a Merton's portfolio and consumption problem, where, in addition,…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
Reinforcement Learning (RL) has gained substantial attention across diverse application domains and theoretical investigations. Existing literature on RL theory largely focuses on risk-neutral settings where the decision-maker learns to…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
We consider an investor faced with the utility maximization problem in which the risky asset price process has pure-jump dynamics affected by an unobservable continuous-time finite-state Markov chain, the intensity of which can also be…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…