We introduce a systematic approach to the problem of maximizing the robust utility of the terminal wealth of an admissible strategy in a general complete market model, where the robust utility functional is defined by a set Q of probability measures. Our main result shows that this problem can often be reduced to determining a " least favorable " measure Q 0 ∈ Q, which is universal in the sense...

We consider a stochastic financial incomplete market where the price processes are described by a vector-valued semimartingale that is possibly nonlocally bounded. We face the classical problem of utility maximization from terminal wealth, with utility functions that are finite-valued over (a,∞), a ∈ [−∞,∞), and satisfy weak regularity assumptions. We adopt a class of trading strategies that al...

We consider a financial market with a stock exposed to a counterparty risk inducing a drop in the price, and which can still be traded after this default time. We use a default-density modeling approach, and address in this incomplete market context the expected utility maximization from terminal wealth. We show how this problem can be suitably decomposed in two optimization problems in complet...

This paper studies the problem of continuous time expected utility maximization of consumption together with addictive habit formation in general incomplete semimartingale financial markets. Introducing an auxiliary state processes and a modified dual space, we embed our original problem into an auxiliary time-separable utility maximization problem with the shadow random endowment. We establish...

Motivated by recent Federal Reserve’s unconventional monetary policies, this paper explicitly models the central bank’s large-scale asset purchases(LSAPs) along with its foresight brought by forward guidance by characterizing the central bank’s actions as a liquidity trader who sends signals to the public q period in advance. Assuming negative-exponential utility with Gaussian uncertainty(CARA-...

The problem of optimal investment for an insurance company attracts more attention in recent years. In general, the investment decision maker of the insurance company is assumed to be rational and risk averse. This is inconsistent with non fully rational decision-making way in the real world. In this paper we investigate an optimal portfolio selection problem for the insurer. The investment dec...

We consider a simple model of a firm acting strategically on behalf of its shareholders. The price normalization problem arising in general equilibrium models of imperfect competition is overcome by using the concept of real wealth maximization. This concept is based on shareholders’ aggregate demand and does not involve any comparison of utility profiles that shareholders can possibly obtain. ...

A financial market model where agents can only trade using realistic buyand-hold strategies is considered. Minimal assumptions are made on the nature of the asset-price process — in particular, the semimartingale property is not assumed. Via a natural assumption of limited opportunities for unlimited resulting wealth from trading, coined the No-Unbounded-Profit-with-Bounded-Risk (NUPBR) conditi...

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a fund/agent investing in futures markets. We offer some preliminary remarks about statistical arbitrage strategies and we set the framework for futures markets, an...

This paper establishes a dynamic portfolio insurance model under the condition of continuous time, based on Meton’s optimal investment-consumption model, which combined the method of replicating dynamic synthetic put option using risk-free and risk assets. And it transfers the problem of investor’s individual inter-temporal dynamic portfolio insurance decision into a problem of static utility m...