Related papers: Sensitivity analysis of utility-based prices and r…
An analytical solution to single-horizon asset allocation for an investor with a piecewise-linear utility function, called herein the "budget threshold utility," and exogenous position limits is presented. The resulting functional form has…
The Mutual Fund Theorem (MFT) is considered in a general semimartingale financial market S with a finite time horizon T, where agents maximize expected utility of terminal wealth. It is established that: 1) Let N be the wealth process of…
Consider a financial market in which an agent trades with utility-induced restrictions on wealth. By introducing a general convex-analytic framework which includes the class of umbrella wedges in certain Riesz spaces and faces of convex…
In recent years, a market for mortality derivatives began developing as a way to handle systematic mortality risk, which is inherent in life insurance and annuity contracts. Systematic mortality risk is due to the uncertain development of…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
We propose an iterative estimating equations procedure for analysis of longitudinal data. We show that, under very mild conditions, the probability that the procedure converges at an exponential rate tends to one as the sample size…
This work deals with the implementation of social choice rules using dominant strategies for unrestricted preferences. The seminal Gibbard-Satterthwaite theorem shows that only few unappealing social choice rules can be implemented unless…
Here we develop an option pricing method based on Legendre series expansion of the density function. The key insight, relying on the close relation of the characteristic function with the series coefficients, allows to recover the density…
Possibilistic risk theory starts from the hypothesis that risk is modelled by fuzzy numbers. In particular, in a possibilistic portfolio choice problem, the return of a risky asset will be a fuzzy number. The expected utility operators have…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such…
We introduce a novel framework for individual-level welfare analysis. It builds on a parametric model for continuous demand with a quasilinear utility function, allowing for heterogeneous coefficients and unobserved individual-good-level…
First, classes of Markov processes that scale exactly with a Hurst exponent H are derived in closed form. A special case of one class is the Tsallis density, advertised elsewhere as nonlinear diffusion or diffusion with nonlinear feedback.…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
The maximum utility estimation proposed by Elliott and Lieli (2013) can be viewed as cost-sensitive binary classification; thus, its in-sample overfitting issue is similar to that of perceptron learning. A utility-maximizing prediction rule…
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 show that risk-aware behaviors in demand response originate from superquadratic state-dependent cost functions and price uncertainty with skewed distributions. We obtain such results through developing a novel theoretical demand response…
Importance sampling is a well developed method in statistics. Given a random variable $X$, the problem of estimating its expected value $\mu$ is addressed. The standard approach is to use the sample mean as an estimator $\bar x$. In…
In this paper the robust utility maximization problem for a market model based on L\'evy processes is analyzed. The interplay between the form of the utility function and the penalization function required to have a well posed problem is…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…