Time Inconsistent Control Theory With Finance Applications

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Time-Inconsistent Control Theory with Finance Applications

Tomas Björk,Mariana Khapko,Agatha Murgoci
Time Inconsistent Control Theory with Finance Applications Book PDF

Author : Tomas Björk,Mariana Khapko,Agatha Murgoci
Publisher : Springer Nature
Page : 328 pages
File Size : 45,8 Mb
Release : 2021-11-02
Category : Mathematics
ISBN : 9783030818432

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Time-Inconsistent Control Theory with Finance Applications by Tomas Björk,Mariana Khapko,Agatha Murgoci Pdf

This book is devoted to problems of stochastic control and stopping that are time inconsistent in the sense that they do not admit a Bellman optimality principle. These problems are cast in a game-theoretic framework, with the focus on subgame-perfect Nash equilibrium strategies. The general theory is illustrated with a number of finance applications. In dynamic choice problems, time inconsistency is the rule rather than the exception. Indeed, as Robert H. Strotz pointed out in his seminal 1955 paper, relaxing the widely used ad hoc assumption of exponential discounting gives rise to time inconsistency. Other famous examples of time inconsistency include mean-variance portfolio choice and prospect theory in a dynamic context. For such models, the very concept of optimality becomes problematic, as the decision maker’s preferences change over time in a temporally inconsistent way. In this book, a time-inconsistent problem is viewed as a non-cooperative game between the agent’s current and future selves, with the objective of finding intrapersonal equilibria in the game-theoretic sense. A range of finance applications are provided, including problems with non-exponential discounting, mean-variance objective, time-inconsistent linear quadratic regulator, probability distortion, and market equilibrium with time-inconsistent preferences. Time-Inconsistent Control Theory with Finance Applications offers the first comprehensive treatment of time-inconsistent control and stopping problems, in both continuous and discrete time, and in the context of finance applications. Intended for researchers and graduate students in the fields of finance and economics, it includes a review of the standard time-consistent results, bibliographical notes, as well as detailed examples showcasing time inconsistency problems. For the reader unacquainted with standard arbitrage theory, an appendix provides a toolbox of material needed for the book.

Time-Inconsistent Control Theory with Finance Applications

Tomas Björk,Mariana Khapko,Agatha Murgoci
Time Inconsistent Control Theory with Finance Applications Book PDF

Author : Tomas Björk,Mariana Khapko,Agatha Murgoci
Publisher : Unknown
Page : 0 pages
File Size : 46,8 Mb
Release : 2021
Category : Electronic
ISBN : 3030818446

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Time-Inconsistent Control Theory with Finance Applications by Tomas Björk,Mariana Khapko,Agatha Murgoci Pdf

This book is devoted to problems of stochastic control and stopping that are time inconsistent in the sense that they do not admit a Bellman optimality principle. These problems are cast in a game-theoretic framework, with the focus on subgame-perfect Nash equilibrium strategies. The general theory is illustrated with a number of finance applications. In dynamic choice problems, time inconsistency is the rule rather than the exception. Indeed, as Robert H. Strotz pointed out in his seminal 1955 paper, relaxing the widely used ad hoc assumption of exponential discounting gives rise to time inconsistency. Other famous examples of time inconsistency include mean-variance portfolio choice and prospect theory in a dynamic context. For such models, the very concept of optimality becomes problematic, as the decision maker's preferences change over time in a temporally inconsistent way. In this book, a time-inconsistent problem is viewed as a non-cooperative game between the agent's current and future selves, with the objective of finding intrapersonal equilibria in the game-theoretic sense. A range of finance applications are provided, including problems with non-exponential discounting, mean-variance objective, time-inconsistent linear quadratic regulator, probability distortion, and market equilibrium with time-inconsistent preferences. Time-Inconsistent Control Theory with Finance Applications offers the first comprehensive treatment of time-inconsistent control and stopping problems, in both continuous and discrete time, and in the context of finance applications. Intended for researchers and graduate students in the fields of finance and economics, it includes a review of the standard time-consistent results, bibliographical notes, as well as detailed examples showcasing time inconsistency problems. For the reader unacquainted with standard arbitrage theory, an appendix provides a toolbox of material needed for the book.

Continuous-time Stochastic Control and Optimization with Financial Applications

Huyên Pham
Continuous time Stochastic Control and Optimization with Financial Applications Book PDF

Author : Huyên Pham
Publisher : Springer Science & Business Media
Page : 243 pages
File Size : 40,6 Mb
Release : 2009-05-28
Category : Mathematics
ISBN : 9783540895008

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Continuous-time Stochastic Control and Optimization with Financial Applications by Huyên Pham Pdf

Stochastic optimization problems arise in decision-making problems under uncertainty, and find various applications in economics and finance. On the other hand, problems in finance have recently led to new developments in the theory of stochastic control. This volume provides a systematic treatment of stochastic optimization problems applied to finance by presenting the different existing methods: dynamic programming, viscosity solutions, backward stochastic differential equations, and martingale duality methods. The theory is discussed in the context of recent developments in this field, with complete and detailed proofs, and is illustrated by means of concrete examples from the world of finance: portfolio allocation, option hedging, real options, optimal investment, etc. This book is directed towards graduate students and researchers in mathematical finance, and will also benefit applied mathematicians interested in financial applications and practitioners wishing to know more about the use of stochastic optimization methods in finance.

Modeling, Stochastic Control, Optimization, and Applications

George Yin,Qing Zhang
Modeling Stochastic Control Optimization and Applications Book PDF

Author : George Yin,Qing Zhang
Publisher : Springer
Page : 599 pages
File Size : 51,7 Mb
Release : 2019-07-16
Category : Mathematics
ISBN : 9783030254988

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Modeling, Stochastic Control, Optimization, and Applications by George Yin,Qing Zhang Pdf

This volume collects papers, based on invited talks given at the IMA workshop in Modeling, Stochastic Control, Optimization, and Related Applications, held at the Institute for Mathematics and Its Applications, University of Minnesota, during May and June, 2018. There were four week-long workshops during the conference. They are (1) stochastic control, computation methods, and applications, (2) queueing theory and networked systems, (3) ecological and biological applications, and (4) finance and economics applications. For broader impacts, researchers from different fields covering both theoretically oriented and application intensive areas were invited to participate in the conference. It brought together researchers from multi-disciplinary communities in applied mathematics, applied probability, engineering, biology, ecology, and networked science, to review, and substantially update most recent progress. As an archive, this volume presents some of the highlights of the workshops, and collect papers covering a broad range of topics.

Point Processes and Jump Diffusions

Tomas Björk
Point Processes and Jump Diffusions Book PDF

Author : Tomas Björk
Publisher : Cambridge University Press
Page : 323 pages
File Size : 50,8 Mb
Release : 2021-06-17
Category : Business & Economics
ISBN : 9781316518670

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Point Processes and Jump Diffusions by Tomas Björk Pdf

Develop a deep understanding and working knowledge of point-process theory as well as its applications in finance.

Arbitrage Theory in Continuous Time

Tomas Bjork
Arbitrage Theory in Continuous Time Book PDF

Author : Tomas Bjork
Publisher : Oxford University Press, USA
Page : 584 pages
File Size : 48,5 Mb
Release : 2020-01-16
Category : Arbitrage
ISBN : 9780198851615

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Arbitrage Theory in Continuous Time by Tomas Bjork Pdf

The fourth edition of this widely used textbook on pricing and hedging of financial derivatives now also includes dynamic equilibrium theory and continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous time arbitrage pricing of financial derivatives, including stochastic optimal control theory and optimal stopping theory, Arbitrage Theory in Continuous Time is designed for graduate students in economics and mathematics, and combines the necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. All concepts and ideas are discussed, not only from a mathematics point of view, but with lots of intuitive economic arguments. In the substantially extended fourth edition Tomas Bjork has added completely new chapters on incomplete markets, treating such topics as the Esscher transform, the minimal martingale measure, f-divergences, optimal investment theory for incomplete markets, and good deal bounds. This edition includes an entirely new section presenting dynamic equilibrium theory, covering unit net supply endowments models and the Cox-Ingersoll-Ross equilibrium factor model. Providing two full treatments of arbitrage theory-the classical delta hedging approach and the modern martingale approach-this book is written so that these approaches can be studied independently of each other, thus providing the less mathematically-oriented reader with a self-contained introduction to arbitrage theory and equilibrium theory, while at the same time allowing the more advanced student to see the full theory in action. This textbook is a natural choice for graduate students and advanced undergraduates studying finance and an invaluable introduction to mathematical finance for mathematicians and professionals in the market.

Stochastic Linear-Quadratic Optimal Control Theory: Open-Loop and Closed-Loop Solutions

Jingrui Sun,Jiongmin Yong
Stochastic Linear Quadratic Optimal Control Theory Open Loop and Closed Loop Solutions Book PDF

Author : Jingrui Sun,Jiongmin Yong
Publisher : Springer Nature
Page : 129 pages
File Size : 44,8 Mb
Release : 2020-06-29
Category : Mathematics
ISBN : 9783030209223

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Stochastic Linear-Quadratic Optimal Control Theory: Open-Loop and Closed-Loop Solutions by Jingrui Sun,Jiongmin Yong Pdf

This book gathers the most essential results, including recent ones, on linear-quadratic optimal control problems, which represent an important aspect of stochastic control. It presents the results in the context of finite and infinite horizon problems, and discusses a number of new and interesting issues. Further, it precisely identifies, for the first time, the interconnections between three well-known, relevant issues – the existence of optimal controls, solvability of the optimality system, and solvability of the associated Riccati equation. Although the content is largely self-contained, readers should have a basic grasp of linear algebra, functional analysis and stochastic ordinary differential equations. The book is mainly intended for senior undergraduate and graduate students majoring in applied mathematics who are interested in stochastic control theory. However, it will also appeal to researchers in other related areas, such as engineering, management, finance/economics and the social sciences.

Stochastic Analysis, Filtering, and Stochastic Optimization

George Yin,Thaleia Zariphopoulou
Stochastic Analysis Filtering and Stochastic Optimization Book PDF

Author : George Yin,Thaleia Zariphopoulou
Publisher : Springer Nature
Page : 466 pages
File Size : 40,5 Mb
Release : 2022-04-22
Category : Mathematics
ISBN : 9783030985196

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Stochastic Analysis, Filtering, and Stochastic Optimization by George Yin,Thaleia Zariphopoulou Pdf

This volume is a collection of research works to honor the late Professor Mark H.A. Davis, whose pioneering work in the areas of Stochastic Processes, Filtering, and Stochastic Optimization spans more than five decades. Invited authors include his dissertation advisor, past collaborators, colleagues, mentees, and graduate students of Professor Davis, as well as scholars who have worked in the above areas. Their contributions may expand upon topics in piecewise deterministic processes, pathwise stochastic calculus, martingale methods in stochastic optimization, filtering, mean-field games, time-inconsistency, as well as impulse, singular, risk-sensitive and robust stochastic control.

Arbitrage Theory in Continuous Time

Tomas Björk
Arbitrage Theory in Continuous Time Book PDF

Author : Tomas Björk
Publisher : OUP Oxford
Page : 600 pages
File Size : 43,7 Mb
Release : 2009-08-06
Category : Business & Economics
ISBN : 9780191610295

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Arbitrage Theory in Continuous Time by Tomas Björk Pdf

The third edition of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton's fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. In this substantially extended new edition Bjork has added separate and complete chapters on the martingale approach to optimal investment problems, optimal stopping theory with applications to American options, and positive interest models and their connection to potential theory and stochastic discount factors. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.

Recent Advances in Financial Engineering 2012

Akihiko Takahashi,Yukio Muromachi,Takashi Shibata
Recent Advances in Financial Engineering 2012 Book PDF

Author : Akihiko Takahashi,Yukio Muromachi,Takashi Shibata
Publisher : World Scientific
Page : 208 pages
File Size : 49,9 Mb
Release : 2014-02-24
Category : Business & Economics
ISBN : 9789814571654

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Recent Advances in Financial Engineering 2012 by Akihiko Takahashi,Yukio Muromachi,Takashi Shibata Pdf

Recent Advances in Financial Engineering 2012 is the Proceedings of the International Workshop on Finance 2012, which was held at the University of Tokyo on October 30 and 31, 2012. This workshop was organized by the Center for Advanced Research in Finance (CARF), Graduate School of Economics, the University of Tokyo, and Graduate School of Social Sciences, Tokyo Metropolitan University (TMU). This annual workshop, which was first held in 2011, is a successor to the Daiwa International Workshop (2004 to 2008) and the KIER–TMU International Workshop (2009 to 2010). The workshop was designed for the exchange of new ideas in financial engineering and to serves as a bridge between academic researchers and practitioners. To these ends, the speakers shared various interesting ideas, information on new methods, and their up-to-date research results. In the 2012 workshop, we invited nine leading scholars, including three keynote speakers, from various countries, and the two-day workshop resulted in many fruitful discussions. The book consists of eight papers, all refereed, that were related to the presentations at the International Workshop on Finance 2012. In these papers, the latest concepts, methods, and techniques related to current topics in financial engineering are proposed and reviewed. Contents:Forward Prices in Markets Driven by Continuous-Time Autoregressive Processes (F E Benth & S A S Blanco)A Bottom-Up Dynamic Model of Portfolio Credit Risk. Part I: Markov Copula Perspective (T R Bielecki, A Cousin, S Crépey, A Herbertsson)A Bottom-Up Dynamic Model of Portfolio Credit Risk. Part II: Common-Shock Interpretation, Calibration and Hedging Issues (T R Bielecki, A Cousin, S Crépey, A Herbertsson)On the Limit Behavior of Option Hedging Sets Under Transaction Costs (J Grépat)Optimal Execution for Uncertain Market Impact: Derivation and Characterization of a Continuous-Time Value Function (K Ishitani and T Kato)Optimal Investment Timing and Volume Decisions Under Debt Borrowing Constraints (T Shibata and M Nishihara)Fractional Brownian Motions in Financial Models and Their Monte Carlo Simulation (C M Tam)Mean-Variance Pre-Commitment Policies Revisited Via a Mean-Field Technique (A Bensoussan, K C Wong, S C P Yam) Readership: Graduate and postgraduate students of financial engineering and mathematical finance; academics and practitioners; quantitative researchers on financial markets. Keywords:Financial Engineering;Mathematical Finance;Money & Banking;Risk Management;Real Option;Corporate Finance;Computational Finance

Robustness

Lars Peter Hansen,Thomas J. Sargent
Robustness Book PDF

Author : Lars Peter Hansen,Thomas J. Sargent
Publisher : Princeton University Press
Page : 453 pages
File Size : 50,5 Mb
Release : 2016-06-28
Category : Business & Economics
ISBN : 9780691170978

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Robustness by Lars Peter Hansen,Thomas J. Sargent Pdf

The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision maker do if the model cannot be trusted? Lars Hansen and Thomas Sargent, two leading macroeconomists, push the field forward as they set about answering this question. They adapt robust control techniques and apply them to economics. By using this theory to let decision makers acknowledge misspecification in economic modeling, the authors develop applications to a variety of problems in dynamic macroeconomics. Technical, rigorous, and self-contained, this book will be useful for macroeconomists who seek to improve the robustness of decision-making processes.

Quantitative Economic Policy

Reinhard Neck,Christian Richter,Peter Mooslechner
Quantitative Economic Policy Book PDF

Author : Reinhard Neck,Christian Richter,Peter Mooslechner
Publisher : Springer Science & Business Media
Page : 386 pages
File Size : 40,5 Mb
Release : 2008-03-04
Category : Political Science
ISBN : 9783540746843

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Quantitative Economic Policy by Reinhard Neck,Christian Richter,Peter Mooslechner Pdf

Econometric techniques and models are still being extensively used in the business of forecasting and policy advice. This book presents recent advances in the theory and applications of quantitative economic policy, with particular emphasis on fiscal and monetary policies in a European and global context. The volume honors Andrew Hughes Hallett, a pioneer and major scientist in quantitative economic policy analysis, whose contributors are among his friends and former students.

Introduction to Econophysics

Rosario N. Mantegna,H. Eugene Stanley
Introduction to Econophysics Book PDF

Author : Rosario N. Mantegna,H. Eugene Stanley
Publisher : Cambridge University Press
Page : 164 pages
File Size : 55,6 Mb
Release : 1999-11-13
Category : Business & Economics
ISBN : 9781139431224

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Introduction to Econophysics by Rosario N. Mantegna,H. Eugene Stanley Pdf

This book concerns the use of concepts from statistical physics in the description of financial systems. The authors illustrate the scaling concepts used in probability theory, critical phenomena, and fully developed turbulent fluids. These concepts are then applied to financial time series. The authors also present a stochastic model that displays several of the statistical properties observed in empirical data. Statistical physics concepts such as stochastic dynamics, short- and long-range correlations, self-similarity and scaling permit an understanding of the global behaviour of economic systems without first having to work out a detailed microscopic description of the system. Physicists will find the application of statistical physics concepts to economic systems interesting. Economists and workers in the financial world will find useful the presentation of empirical analysis methods and well-formulated theoretical tools that might help describe systems composed of a huge number of interacting subsystems.

Continuous-Time Finance

Robert C. Merton
Continuous Time Finance Book PDF

Author : Robert C. Merton
Publisher : Wiley-Blackwell
Page : 754 pages
File Size : 43,8 Mb
Release : 1992-11-03
Category : Business & Economics
ISBN : 0631185089

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Continuous-Time Finance by Robert C. Merton Pdf

Robert C. Merton's widely-used text provides an overview and synthesis of finance theory from the perspective of continuous-time analysis. It covers individual finance choice, corporate finance, financial intermediation, capital markets, and selected topics on the interface between private and public finance.

Recent Developments in Computational Finance

Thomas Gerstner,Peter E. Kloeden
Recent Developments in Computational Finance Book PDF

Author : Thomas Gerstner,Peter E. Kloeden
Publisher : World Scientific
Page : 481 pages
File Size : 40,5 Mb
Release : 2013
Category : Business & Economics
ISBN : 9789814436434

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Recent Developments in Computational Finance by Thomas Gerstner,Peter E. Kloeden Pdf

Computational finance is an interdisciplinary field which joins financial mathematics, stochastics, numerics and scientific computing. Its task is to estimate as accurately and efficiently as possible the risks that financial instruments generate. This volume consists of a series of cutting-edge surveys of recent developments in the field written by leading international experts. These make the subject accessible to a wide readership in academia and financial businesses. The book consists of 13 chapters divided into 3 parts: foundations, algorithms and applications. Besides surveys of existing results, the book contains many new previously unpublished results.