Related papers: State Dependent Utility
We study utility maximization for power utility random fields with and without intermediate consumption in a general semimartingale model with closed portfolio constraints. We show that any optimal strategy leads to a solution of the…
We discuss Bayesian forecasting of increasingly high-dimensional time series, a key area of application of stochastic dynamic models in the financial industry and allied areas of business. Novel state-space models characterizing sparse…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…
At the zero lower bound, the New Keynesian model predicts that output and inflation collapse to implausibly low levels, and that government spending and forward guidance have implausibly large effects. To resolve these anomalies, we…
We study a dynamic random utility model that allows for consumption dependence. We axiomatically analyze this model and find insights that allow us to distinguish between behavior that arises due to consumption dependence and behavior that…
In this article, we study a finite horizon linear-quadratic stochastic control problem for Brownian particles, where the cost functions depend on the state and the occupation measure of the particles. To address this problem, we develop an…
In this article, we present a general methodology for control problems driven by the Brownian motion filtration including non-Markovian and non-semimartingale state processes controlled by mutually singular measures. The main result of this…
We present a methodology for obtaining explicit solutions to infinite time horizon optimal stopping problems involving general, one-dimensional, It\^o diffusions, payoff functions that need not be smooth and state-dependent discounting.…
This paper introduces a novel stochastic control framework to enhance the capabilities of automated investment managers, or robo-advisors, by accurately inferring clients' investment preferences from past activities. Our approach leverages…
We present several models to describe the stochastic evolution of stocks that show some strong resistance at some level and generalize to this situation the evolution based upon geometric Brownian motion. If volatility and drift are related…
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 develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
The increasing amount of controllable generation and consumption in distribution grids poses a severe challenge in keeping voltage values within admissible ranges. Existing approaches have considered different optimal power flow…
This study investigates a stochastic production planning problem with regime-switching parameters, inspired by economic cycles impacting production and inventory costs. The model considers types of goods and employs a Markov chain to…
This paper studies stability of the exponential utility maximization when there are small variations on agent's utility function. Two settings are considered. First, in a general semimartingale model where random endowments are present, a…
We consider a continuous-review inventory system in which the setup cost of each order is a general function of the order quantity and the demand process is modeled as a Brownian motion with a positive drift. Assuming the holding and…
The mathematical theory for optimal switching is by now relatively well developed, but the number of concrete applications of this theoretical framework remains few. In this paper, we bridge parts of this gap by applying optimal switching…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…