This paper develops a tractable dynamic model of competition between two risk-averse portfolio managers who attempt to outperform each other by trading in different stocks, reflecting asset specialization. We characterize explicitly the unique Nash equilibrium portfolio policies, and show that a...

We confront the generalized recursive smooth ambiguity aversion preferences of Klibanoff, Marinacci, and Mukerji (2005, 2009) with data using Bayesian methods introduced by Gallant and McCulloch (2009) to close two existing gaps in the literature. First, we use macroeconomic and financial data...

We consider an optimal execution problem where an agent holds a position in an asset which must be liquidated (using limit orders) before a terminal horizon. Beginning with a standard model for the trading dynamics, we analyse how the acknowledgement of model misspecification affects the agent's...

The concept of model uncertainty is one of increasing importance in the field of Mathematical Finance. The main goal of this work is to explore model uncertainty in the specific area of algorithmic and high frequency trading. From a behavioural perspective, model uncertainty naturally leads to...

We consider an investor who faces parameter uncertainty in a continuous-time financial market. We model the investor's preference by a power utility function leading to constant relative risk aversion. We show that the loss in expected utility is large when using a simple plug-in strategy for...

This paper looks at a general framework for mean-field games with ambiguity averse players based on the probabilistic framework described in Carmona (2013). A framework for mean-field games with ambiguity averse players is presented, using a version of the stochastic maximum principle to find...

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

The extant supply chain management literature has not addressed the issue of coordination in supply chains involving risk-averse agents. We take up this issue and begin with defining a coordinating contract as one that results in a Pareto-optimal solution acceptable to each agent. Our definition...

Many industries use revenue management to balance uncertain, stochastic demand and inflexible capacity. Popular examples include airlines, hotels, car rentals, retailing, and manufacturing. The classical revenue management approaches considered in theory and practice are based on two...