Related papers: Merton's Problem with Recursive Perturbed Utility
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…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
We study random utility (RU) rationality with aggregation when the underlying alternatives in each aggregate vary across consumers and are unobserved, as is typical for an outside option. RUM over the underlying alternatives is the natural…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
We study a problem of utility maximization under model uncertainty with information including jumps. We prove first that the value process of the robust stochastic control problem is described by the solution of a quadratic-exponential…
The idiosyncratic (microscopic) and systemic (macroscopic) components of market structure have been shown to be responsible for the departure of the optimal mean-variance allocation from the heuristic `equally-weighted' portfolio. In this…
Bellman formulated a vague principle for optimization over time, which characterizes optimal policies by stating that a decision maker should not regret previous decisions retrospectively. This paper addresses time consistency in stochastic…
In this paper, we consider a situation where a decision maker's (DM's) risk preference can be described by a spectral risk measure (SRM) but there is not a single SRM which can be used to represent the DM's preferences consistently.…
We give explicit solutions for utility maximization of terminal wealth problem $u(X_T)$ in the presence of Knightian uncertainty in continuous time $[0,T]$ in a complete market. We assume there is uncertainty on both drift and volatility of…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
Classical reinforcement learning (RL) techniques are generally concerned with the design of decision-making policies driven by the maximisation of the expected outcome. Nevertheless, this approach does not take into consideration the…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility…
We propose a simple randomized rule for the optimization of prices in revenue management with contextual information. It is known that the certainty equivalent pricing rule, albeit popular, is sub-optimal. We show that, by allowing a small…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
We propose a novel portfolio selection approach that manages to ease some of the problems that characterise standard expected utility maximisation. The optimal portfolio is no longer defined as the extremum of a suitably chosen utility…
This paper investigates the optimization problem of an infinite stage discrete time Markov decision process (MDP) with a long-run average metric considering both mean and variance of rewards together. Such performance metric is important…
This paper provides nonparametric identification results for random coefficient distributions in perturbed utility models. We cover discrete and continuous choice models. We establish identification using variation in mean quantities, and…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…