Related papers: Merton's Problem with Recursive Perturbed Utility
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
We study dynamic optimal portfolio allocation for monotone mean--variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize…
We study the interaction between strategy, heterogeneity and growth in a two-agent model of capital accumulation. Preferences are represented by recursive utility functions with decreasing marginal impatience. The stationary equilibria of…
We describe a new approach for managing aleatoric uncertainty in the Reinforcement Learning (RL) paradigm. Instead of selecting actions according to a single statistic, we propose a distributional method based on the second-order stochastic…
In this paper, we consider a multistage expected utility maximization problem where the decision maker's utility function at each stage depends on historical data and the information on the true utility function is incomplete. To mitigate…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
The monotone mean-variance (MMV) preference proposed by Maccheroni, et al. (Math. Finance 19(3): 487-521, 2009) fails to differentiate strictly dominant payoffs, which may cause inconsistency in portfolio decision-making. This paper…
We study a discrete-time portfolio selection problem with partial information and maxi\-mum drawdown constraint. Drift uncertainty in the multidimensional framework is modeled by a prior probability distribution. In this Bayesian framework,…
A differentially private selection algorithm outputs from a finite set the item that approximately maximizes a data-dependent quality function. The most widely adopted mechanisms tackling this task are the pioneering exponential mechanism…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
In this paper, we study the optimal dividend problem under the continuous time diffusion model with the bounded dividend rate from the Reinforcement Learning (RL) perspective. Unlike the standard literature, our main focus will be on…
We introduce a linear space of finitely additive measures to treat the problem of optimal expected utility from consumption under a stochastic clock and an unbounded random endowment process. In this way we establish existence and…
Utility-Based Shortfall Risk (UBSR) is a risk metric that is increasingly popular in financial applications, owing to certain desirable properties that it enjoys. We consider the problem of estimating UBSR in a recursive setting, where…
We study a benchmarked risk-sensitive portfolio problem in a factor-based setting to bring together three strands of the literature: benchmarked risk-sensitive investment management, the Kuroda-Nagai change-of-measure method, and the free…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
We consider the challenge of finding a deterministic policy for a Markov decision process that uniformly (in all states) maximizes one reward subject to a probabilistic constraint over a different reward. Existing solutions do not fully…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…
This paper is concerned with portfolio selection for an investor with power utility in multi-asset financial markets in a rough stochastic environment. We investigate Merton's portfolio problem for different multivariate Volterra models,…