Should an investor unwind his portfolio in the face of changing economic conditions? We study an investor's optimal trading strategy with finite horizon and transaction costs in an economy that switches stochastically between two market conditions. We fully characterize the investor's time...

We study the dynamic consumption-portfolio problem over the life cycle, with respect to tax-deferred investing for investors who acquire housing services by either renting or owning a home. The joint existence of these two investment vehicles creates potential for tax arbitrage. Specifically,...

We solve for the time consistent dynamic asset allocation of an investor with a mean variance objective function in a multiple assets affine setting. We use as a benchmark the pre-commitment strategy widely used in the literature and assess the potential welfare gains from pre-commitment by...

We develop in this paper a novel portfolio selection framework with a feature of double robustness in both return distribution modeling and portfolio optimization. While predicting the future return distributions always represents the most compelling challenge in investment, any underlying...

To value non-transferable non-hedgeable (NTNH) contingent claims and price executive stock options (ESOs), we use a replication argument to translate portfolios with NTNH derivatives into portfolios of primary assets (only) with stochastic portfolio constraints. By identifying stochastic...

In this article, we study the effects on derivative pricing arising from price impacts by large traders. When a large trader issues a derivative and (partially) hedges his risk by trading in the underlying, he influences both his hedge portfolio and the derivative's payoff. In a Black–Scholes...

We consider Constant Proportion Portfolio Insurance (CPPI) and its dynamic extension, which may be called Dynamic Proportion Portfolio Insurance (DPPI). It is shown that these investment strategies work within the setting of Föllmer's pathwise Itô calculus, which makes no probabilistic...

The optimal investment policy for a standard multi-period mean–variance model is not time-consistent because the variance operator is not separable in the sense of the dynamic programming principle. With a nested conditional expectation mapping, we develop an investment model with time...

This paper proposes downside risk measure models in portfolio selection that captures uncertainties both in distribution and in parameters. The worst-case distribution with given information on the mean value and the covariance matrix is used, together with ellipsoidal and polytopic uncertainty...

This paper analyzes the role of stochastic uncertainty in a multi-sector housing model with financial frictions. We include time varying uncertainty (i.e. risk shocks) in the technology shocks that affect housing production and provide estimates of the time-series properties of risk shocks by...