Recently, prediction markets have shown considerable promise for developing flexible mechanisms for machine learning. In this paper, agents with isoelastic utilities are considered. It is shown that the costs associated with homogeneous markets of agents with isoelastic utilities produce equilibrium prices correspondin…
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48 results for “isoelastic utility”
Study optimal portfolio strategy with sporadic bankruptcy for isoelastic utility.
problem Maximizing expected isoelastic utility in a stock with potential bankruptcy.
method Coupled Hamilton-Jacobi-Bellman (HJB) equations, stochastic integral approach.
result Non-myopic optimal weights for non-logarithmic utilities.
By analysing the restrictions that ensure the existence of capital market equilibrium, we show that the coefficient of relative risk aversion and the subjective discount factor cannot be high simultaneously as they are supposed to be to make the standard asset pricing consistent with financial stylised facts.
Portfolio turnpikes state that, as the investment horizon increases, optimal portfolios for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turnpikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs and portfolios converge under …
This paper solves the problem of optimal dynamic consumption, investment, and healthcare spending with isoelastic utility, when natural mortality grows exponentially to reflect Gompertz' law and investment opportunities are constant. Healthcare slows the natural growth of mortality, indirectly increasing utility from c…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semimartingale model. As a consequence, op…
The notion of utility maximising entropy (u-entropy) of a probability density, which was introduced and studied by Slomczynski and Zastawniak (Ann. Prob 32 (2004) 2261-2285, arXiv:math.PR/0410115 v1), is extended in two directions. First, the relative u-entropy of two probability measures in arbitrary probability space…
Long term optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal strategy converge to their long-run counterparts as the investment horizon approache…
ANN-based dynamic portfolio optimization outperforms traditional methods.
problem Optimizing dynamic portfolios in finance.
method Using artificial neural networks for dynamic portfolio allocation.
result ANN-based strategies outperform traditional methods in optimal portfolio allocation.
We derive the optimal investment decision in a project where both demand and investment costs are stochastic processes, eventually subject to shocks. We extend the approach used in Dixit and Pindyck (1994), chapter 6.5, to deal with two sources of uncertainty, but assuming that the underlying processes are no longer ge…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied welfare, liquidity premium, and trading volume. We identify these quantities as…
New method for fair resource allocation in AI-aware networks with unknown utility functions.
problem Fair resource allocation in AI-aware communication networks with unknown utility functions.
method Distributed, data-driven bilevel optimization approach to learn surrogate utility functions.
result The proposed algorithm learns from data to autotune surrogate utility functions for unknown utility functions.
Optimizes portfolios with utility theory, diversification, and leverage.
problem Finding optimal portfolio allocation strategies.
method Utility theory, exponential and logarithmic utilities, compound probability distributions, maximum expected utility, generalized mean-variance.
result Enhanced portfolio allocation strategies with natural explanations.
New algorithm tackles unknown utility network resource allocation.
problem Maximizing network utility with unknown agent utilities.
method Modeling as a bandit problem, proposing algorithms for resource allocation.
result Proposed algorithms are optimal when all agents have the same utility.
Study robust utility maximization with uncertain continuous semimartingales.
problem Maximizing utility in continuous time under model uncertainty.
method Duality and conjugate problems for logarithmic, exponential, and power utilities.
result Existence of optimal portfolios for various utilities.
Theory integrates loss aversion into expected utility for monetary returns.
problem Modeling loss aversion in expected utility theory.
method Develops state-dependent linear utility functions incorporating loss aversion.
result Contracts from monopolists in insurance markets.
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between probability and utility through the notion of a utility density function. According…
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 sequence of utilities defined on R converges to the exponential utility. Under a …
Study adds investment gains and losses to recursive utility model, proving existence and uniqueness of utility process.
problem Existence and uniqueness of utility process in a recursive utility model with investment gains and losses.
method Generalized recursive utility model with constant elasticity of intertemporal substitution and relative risk aversion degree. Proved existence and uniqueness in a specific, finite-state Markovian setting.
result Utility process exists and is unique when agent derives nonnegative gain-loss utility, and non-existent or non-unique otherwise.
Novel framework for portfolio selection considering utility and risk.
problem Maximizing utility subject to risk constraints with various utility and risk functionals.
method General framework accommodating non-concave utilities and non-convex risk measures. Characterization of well-posedness using a simple either-or criterion.
result Minimal condition for well-posedness: either utility or risk must be sensitive to large losses.
Closed-form optimal portfolios for exponential utility in small/large markets.
problem Optimal portfolios maximizing exponential utility in small/large financial markets.
method Closed-form expressions for optimal portfolios in small markets, convergence to large market optimal utility, numerical procedure for general utility functions.
result Optimal utility in large markets converges to optimal utility in small markets, requiring infinite diversification.
The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate optimal consumption. For such a long maturity modelization, the possibility of adju…
Study on hedging with delayed strategies for exponential utility maximization.
problem Maximizing exponential utility in semistatic hedging.
method Explicit computations for delayed semistatic hedging.
result Developed methods for hedging with delayed strategies.
The paper examines utility maximization in markets with hidden Gaussian drift, finding restrictions on model parameters.
problem Utility maximization problems in markets with hidden Gaussian drift mean-reverting processes.
method Derives sufficient conditions for bounded maximum expected utility of terminal wealth for models with full and partial information.
result Restrictions on model parameters for bounded maximum expected utility.
We consider market players with tail-risk-seeking behaviour as exemplified by the S-shaped utility introduced by Kahneman and Tversky. We argue that risk measures such as value at risk (VaR) and expected shortfall (ES) are ineffective in constraining such players. We show that, in many standard market models, product d…
Study on robust utility maximization with nonconcave utility functions under projective determinacy.
problem Investor's optimal investment strategy under model ambiguity and nonconcave utility.
method Projective functions of the path and sets of priors, upper-semicontinuous utility.
result Existence of optimal investment strategy under PD.
Investment and consumption strategy optimized under uncertain conditions.
problem Optimal investment and consumption under logarithmic utility and uncertainty model.
method Characterized using quadratic BSDE.
result Optimal solution found.
We study the dual formulation of the utility maximization problem in incomplete markets when the utility function is finitely valued on the whole real line. We extend the existing results in this literature in two directions. First, we allow for nonsmooth utility functions, so as to include the shortfall minimization p…
Investigates conditions for risk or utility functionals to be sensitive to large losses.
problem Conditions for risk or utility functionals to be sensitive to large losses.
method Analyzes sensitivity to large losses for various risk and utility functionals.
result Value at Risk and Expected Shortfall generally fail to be sensitive to large losses, but expected utility functionals and certain adjusted versions are sensitive.
The study bounds the utility of empirically optimal portfolios using stock return data.
problem Maximizing expected ratio of portfolio utility to best asset utility.
method High probability utility bounds derived from Lipschitz or Hölder continuous utility functions.
result Utility bounds depend on utility function, number of assets, and observations.
The paper solves a utility-based hedging problem with quadratic costs.
problem Optimal trading strategy for hedging European contingent claims with quadratic transaction costs.
method Duality theory applied to exponential utility maximization problem.
result Explicit computation of optimal trading strategy for quadratic payoffs.
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the existence of an optimal trading strategy within a class of permissible strategies -- t…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model, and provides two linear approximations for the utility indifference price. The key tool is a probabilistic representation for the utility indifference price by the solution of a functional differential equation…
Introduces new performance measures using scaled utility functions.
problem Performance measurement in financial contexts.
method Certainty equivalents defined via scaled utility functions, well-posed portfolio optimization problem under generic conditions.
result Link between portfolio dynamics, benchmark process, and utility function choice in the long-run setting.
GBC methods compute expected utility without needing the model's density.
problem Computing expected utility in complex models.
method Density-free generative method using quantile neural estimator.
result Efficient estimation of expected utility from simulated data.
Investor maximizes utility from an unknown claim using robust optimization.
problem Maximizing utility from an unknown contingent claim.
method Robust optimization with quantile formulation and variational inequalities.
result Optimal trading strategy and utility indifference price determined.
Study on efficiency in economies with risk-averse agents, finding Pareto optima.
problem Efficiency in economies with risk-averse agents.
method Analysis of utility functionals, existence and characterization of Pareto optima.
result Existence and comonotone characterization of Pareto optima for risk-averse agents.
A new model uses neural networks for consistent discrete choice analysis.
problem Difficulties in specifying utility functions in RUM models.
method Alternative-Specific and Shared weights Neural Network (ASS-NN) model.
result ASS-NN provides consistent outcomes without specifying utility form.
A framework for eliciting utility functions from investor preferences.
problem Hard elicitation of specific utility functions in portfolio selection.
method Preference-fitting method using probability-wealth pairs and PHARA approximation.
result Fitted utility function converges to the optimal one as more data is used.
Optimal portfolios are found for a wide range of utility functions under hyperbolic returns.
problem Portfolio optimization under expected utility criterion for large portfolios.
method Analytical expressions for optimal portfolios under hyperbolic return distributions and various utility functions.
result The two-fund separation holds true for a broad class of utility functions.
We review the utility-based valuation method for pricing derivative securities in incomplete markets. In particular, we review the practical approach to the utility-based pricing by the means of computing the first order expansion of marginal utility-based prices with respect to a small number of random endowments.
RUMBoost combines RUMs and deep learning for better choice modelling.
problem Creating interpretable and robust discrete choice models.
method Gradient Boosted Regression Trees for utility functions, with constraints for interpretability and monotonicity.
result RUMBoost outperforms ML and RUM benchmarks in predictive performance and interpretability.
Sequential pattern mining is an interesting research area with broad range of applications. Most prior research on sequential pattern mining has considered point-based data where events occur instantaneously. However, in many application domains, events persist over intervals of time of varying lengths. Furthermore, tr…
Paper develops duality theory for robust utility maximization in continuous time.
problem Maximizing utility in the presence of uncertainty.
method Introduces a duality theory for continuous-time robust utility maximization problems.
result Shows duality between robust utility maximization and a conjugate problem under certain conditions.
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 a long maturity modelization, the possibility of adjusting preferences to new ec…
Solves asset allocation for investors with utility functions and limits.
problem Investor risk and utility with position limits.
method Analytical solution for piecewise-linear utility function with position limits.
result Simple functional form representing risk cost.
This paper solves optimal investment-consumption problems for a risk-averse agent with special utility.
problem Optimal investment-consumption problem for a risk-averse agent with special utility.
method Introduced proper utility process and solved optimal investment-consumption problem.
result Existence and uniqueness of proper utility processes for a wide class of consumption streams.
Study utility indifference pricing in a Bachelier model with small linear price impact.
problem Utility indifference pricing in a model with linear price impact.
method Analyzes the Bachelier model with exponential utility indifference prices for vanilla European options.
result Computes the scaling limit of utility indifference prices for a vanishing price impact inversely proportional to risk aversion.