We study portfolio selection in a one-period financial market with an Expected Shortfall (ES) constraint. Unlike in classical mean-variance portfolio selection, it can happen that no efficient portfolios exist. We call this situation regulatory arbitrage and show that the presence or absence of...

There are two major streams of literature on the modeling of financial bubbles: the strict local martingale framework and the Johansen-Ledoit-Sornette (JLS) financial bubble model. Based on a class of models that embeds the JLS model and can exhibit strict local martingale behavior, we clarify...

We study the sensitivity of optimal consumption streams with respect to perturbations of the random endowment. At the leading order, the consumption adjustment does not matter: any choice that matches the budget constraint simply shifts the original utility by the marginal value of the...