Investing on behalf of a firm, a trader can feign personal skill by committing fraud that with high probability remains undetected and generates small gains, but that with low probability bankrupts the firm, offsetting ostensible gains. Honesty requires enough skin in the game: if two traders...

Time-varying asset returns lead highly risk-averse investors to choose market-timing exposures that increase in their horizon, in agreement with the common advice to reduce risk with age, but in contrast to theoretical work that prescribes constant portfolio weights. In a market where an...

In a continuous-time model with multiple assets described by cadlag processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. With such...

When the planning horizon is long, and the safe asset grows indefinitely, iso-elastic portfolios are nearly optimal for investors who are close to iso-elastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semi-martingale...

In a complete market, we find optimal portfolios for an investor whose satisfaction stems from both a payoff's intrinsic utility and its comparison with a reference, as specified by Köszegi and Rabin. In the regular regime, arising when reference-dependence is low, the marginal utility of the...

In the high-frequency limit, conditional expected increments of fractional Brownian motion converge to a white noise, shedding their dependence on the path history and the forecasting horizon, and making dynamic optimization problems tractable. We find an explicit formula for locally...

A monopolist platform (the principal) shares profits with a population of affiliates (the agents), heterogeneous in skill, by offering them a common nonlinear contract contingent on individual revenue. The principal cannot discriminate across individual skill, but knows its distribution and aims...