# Questions tagged [utility-theory]

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### How to compare mean-variance-skewness-kurtosis portfolios obtained by expected utility maximization?

Suppose I have some portfolios which are the result of maximizing the expected utility of different approximations of a utility function, how do you test these portfolio's out-of-sample and how do you ...
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### Anyone has detailed explanation on how to use epstein-zin preferences in asset pricing models

I'd be interested to know how Epstein-Zin preferences are used in, say, consumption-based asset pricing models. I'm looking for specific derivations (how you get the SDF) and possible numerical ...
196 views

### ETF pricing papers

May I request for research paper recommendations, if any, on existing models that study how the presence of ETFs affect equilibrium prices of the underlying assets? I am exploring a project on a ...
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### Does CRRA-utility imply higher risk-aversion for lower wealth?

Consider the utility function $u(W)=\dfrac{1}{1-\gamma}W^{1-\gamma}$, where $\gamma=0.5$ Since this function will exhibit decreasing marginal utility of wealth, is it correct to say that for any ...
519 views

### Debreu's Representation Theorem proof

In microeconomy this theorem states that : given a consumption set $X\subseteq\mathbb{R}^n$, if the preference relation $\succcurlyeq$ is complete, transitive and continuous there exist a utility ...
1k views

### Finding parameters of an utility function in a market making strategy to apply it in practice

I am reading this paper below about optimal bid-ask spread in a market making strategy. It finds an approximation for optimal solution, but I cannot understand how it's practice to set the parameters ...
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### How to derive Expected utility approximation with power function

My question concern how to derive the expected utility of a power function in the following model: I have two normally distributed risky assets X and Y and a risk-free asset B, for which : rA = 0.5y ...
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### Martingale method for utility maximization - is the optimal strategy also a martingale?

The Martingale Method for utility maximization (seen in e.g. Björk's book) is based on separating the optimization problem $E^\mathbb{P}[U(X_T)]$ over a class of admissible strategies into the static ...
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### List of risk-averse utility functions

In the context of optimal portfolio allocation, I am looking for a (possibly exhaustive) list of risk-averse utility functions verifying part of the so-called Inada conditions. Essentially, I am ...
971 views

### Explain Four Basic Axioms of Maximising Expected Utility

I begin learn PRM , Someone help me understand Four Basic Axioms of Maximising Expected Utility most intuitive way .Thank you very much
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### example Hamilton-Jacobi-Bellman Equation - clarification of $dX_t$ derivation using $\pi_t$, $\Pi_t$

I have a market with safe rate r and risky asset S $$\frac{dS_t}{S_t}=(r+Y_t)dt+\sigma dW_t \quad \quad (1)$$ $$dY_t = - \lambda Y_t +dB_t \quad \quad (2)$$ where W, B are Brownian Motions with ...
82 views