The paper reports on a study of the feedback effects induced by portfolio optimizers on the underlying asset prices. Through their interaction with reference traders, who trade based on some aggregate incomes process, they are assumed to move asset prices away from the standard log-normal model....

We formulate stochastic robust optimal control problems, motivated by applications arising in interconnected economic systems, or spatially extended economies. We study in detail linear quadratic problems and nonlinear problems. We derive optimal robust controls and identify conditions under...

We consider a collective insurance risk model with a compound Cox claim process, in which the evolution of a claim intensity is described by a stochastic differential equation driven by a Brownian motion. The insurer operates in a financial market consisting of a risk-free asset with a constant...

We consider a collective insurance risk model with a compound Cox claim process, in which the evolution of a claim intensity is described by a stochastic differential equation driven by a Brownian motion. The insurer operates in a financial market consisting of a risk-free asset with a constant...

A crucial assumption in the Black-Scholes theory of options pricing is the no transaction costs assumption. However, following such a strategy in the presence of transaction costs would lead to immediate ruin. This paper presents a stochastic control approach to the pricing and hedging of a...

A portfolio selection model is derived for diffusions where inequality constraints are imposed on portfolio security weights. Using the method of stochastic dynamic programming Hamilton-Jacobi-Bellman (HJB) equations are obtained for the problem of maximizing the expected utility of terminal...

We propose a model for analyzing dynamic pairs trading strategies using the stochastic control approach. The model is explored in an optimal portfolio setting, where the portfolio consists of a bank account and two co-integrated stocks and the objective is to maximize for a fixed time horizon,...