Related papers: State Dependent Utility
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 consider a problem of an optimal consumption strategy on the infinite time horizon when the short-rate is a diffusion process. General existence and uniqueness theorem is illustrated by the Vasicek and so-called invariant interval…
In this paper, we study the portfolio utility maximization in the case where the risky asset is driven by a Brownian motion and an independent homogeneous Poisson measure, with strategies that may include jump signals. This means that the…
When evaluating policies that affect future generations, the most commonly used criterion is the discounted utilitarian rule. However, in terms of intergenerational fairness, it is difficult to justify prioritizing the current generation…
We develop a continuous-time general equilibrium framework for economies with a heterogeneous population -- modeled as a continuum -- that repeatedly optimizes over short horizons under relative-income (Duesenberry-type) criteria. The…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
The paper generalizes the construction by stochastic flows of consistent utility processes introduced by M. Mrad and N. El Karoui in (2010). The utilities random fields are defined from a general class of processes denoted by $\GX$. Making…
Decision theory does not traditionally include uncertainty over utility functions. We argue that the a person's utility value for a given outcome can be treated as we treat other domain attributes: as a random variable with a density…
We study a robust maximization problem from terminal wealth and consumption under a convex constraints on the portfolio. We state the existence and the uniqueness of the consumption-investment strategy by studying the associated quadratic…
We consider a generalization of the recursive utility model by adding a new component that represents utility of investment gains and losses. We also study the utility process in this generalized model with constant elasticity of…
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…
A celebrated financial application of convex duality theory gives an explicit relation between the following two quantities: (i) The optimal terminal wealth $X^*(T) : = X_{\varphi^*}(T)$ of the problem to maximize the expected $U$-utility…
We study the analyticity of the value function in optimal investment with expected utility from terminal wealth and the relation to stochastically dominant financial models. We identify both a class of utilities and a class of…
We study an optimal investment problem under contagion risk in a financial model subject to multiple jumps and defaults. The global market information is formulated as a progressive enlargement of a default-free Brownian filtration, and the…
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 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…
The sum-utility maximization problem is known to be important in the energy systems literature. The conventional assumption to address this problem is that the utility is concave. But for some key applications, such an assumption is not…
We examine the issue of sensitivity with respect to model parameters for the problem of utility maximization from final wealth in an incomplete Samuelson model and mainly, but not exclusively, for utility functions of positive power-type.…
The paper investigates the consumption-investment problem for an investor with Epstein-Zin utility in an incomplete market. Closed, not necessarily convex, constraints are imposed on strategies. The optimal consumption and investment…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…