This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk...

This paper studies a discrete-time portfolio optimization problem, wherein the underlying risky asset follows a Lévy GARCH model. Besides a Gaussian noise, the framework allows for various jump increments, including infinite-activity jumps. Using a dynamic programming approach and exploiting...

We study an optimal liquidation problem with multiplicative price impact in which the trend of the asset's price is an unobservable Bernoulli random variable. The investor aims at selling over an infinite time-horizon a fixed amount of assets in order to maximize a net expected profit...

This paper develops an approximate closed-form optimal portfolio allocation formula for a spot asset whose variance follows a GARCH(1,1) process. We consider an investor with constant relative risk aversion (CRRA) utility who wants to maximize the expected utility from terminal wealth under a...

The algorithm for optimization of a credit portfolio has not been fully demonstrated. This paper fills the gap in the literature by presenting a general approach for optimizing a credit portfolio by minimizing the default risk of the entire portfolio. Default risk is measured with quadratic...

This study focuses on efficient asset allocations that properly include T-bills, T-bonds, and the S&P 500 stock index. It checks that their annual real rates of linear return are both normal and almost lognormal. It reexamines how efficient portfolios based on the rates of linear return may turn...

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without...

We consider the strategic interaction of traders in a continuous-time financial market with Epstein-Zin-type recursive intertemporal preferences and performance concerns. We derive explicitly an equilibrium for the finite player and the mean-field version of the game, based on a study of...