In linear-quadratic control (LQC) problems with singular control cost matrix and/or singular transition matrix, we derive a reduction of the dimension of the Riccati matrix, simplifying iteration and solution. Employing a novel transformation, we show that, under a certain rank condition, the...

In recent years it has been shown empirically that stock returns exhibit positive or negative autocorrelation, depending on observation frequency. In this context of autocorrelated returns the present paper is the first to derive an explicit analytical solution to the dynamic portfolio problem...

This paper considers decision-making in the presence of two additive risk sources, with no restrictions on the relation between the two risks. A utility function is said to exhibit broad DARA if and only if a rise in wealth always decreases the magnitude of the risk premium for one of the risks...

Despite discussions about the relationship between returns to scale and economies of scale under assumptions of constant and nonconstant input prices, mistakes continue to be made in textbooks on these issues. This article demonstrates the pointwise relation between returns to scale and...

In linear-quadratic control (LQC) problems with singular control cost matrix and/or singular transition matrix, we derive a reduction of the dimension of the Riccati matrix, simplifying iteration and solution. Employing a novel transformation, we show that, under a certain rank condition, the...