We consider the utility maximization problem for an investor who faces a solvency or risk constraint in addition to a budget constraint. The investor wishes to maximize her expected utility from terminal wealth subject to a bound on her expected solvency at maturity. We measure solvency using a solvency function applied to the terminal wealth. The motivation for our analysis is an optimal inves...

This work introduces a new tool for a fund manager to verifiably communicate portfolio risk characteristics to an investor. We address the classic dilemma: How can an investor and fund manager build trust when the two party’s interests are not aligned? In addition to high returns, a savvy investor would like a fund’s composition to reflect his own risk preferences. Hedge funds, on the other han...

This study focuses on how entrepreneurs can optimize the venture capital procurement process by understanding the venture investment decision-making process. For new ventures, procuring capital is a notoriously difficult process. To succeed, an entrepreneurial team must overcome investor uncertainty about the quality of their product/service/idea and market, as well as their own capability to e...

We analyze the portfolio choice of an investor who can invest in two risky assets (in addition to a riskless asset) and who is subject to taxes on realized capital gains. These taxes appear in the portfolio choice problem as a form of time-dependent, endogenous transaction costs. Similar to the case of portfolio choice with transaction costs, the optimal strategy of the taxable investor contain...

An “average investor” is an investor who has “average risk aversion”, “average expectations” on the market returns and should invest in the “market portfolio” (this is, according to the Capital Asset Pricing Model, the best possible portfolio for such an investor). He is compared with a “non-average investor”. This—in our setting—is an investor who has the same “average risk aversion” but inves...

This paper addresses how asymmetric information, fads and Lévy jumps in the price of an asset affect the optimal portfolio strategies and maximum expected utilities of two distinct classes of rational investors in a financial market. We obtain the investors’ optimal portfolios and maximum expected logarithmic utilities and show that the optimal portfolio of each investor is more or less than it...

If the contract makes dividend adjustments (as typical for contracts on single stocks but not on indices), then the term inside the parentheses becomes log((Yn+Dn)/Yn−1), where Dn denotes the dividend payment, if any, of the nth period. Corridor variance swaps accumulate only the variance that occurs while price is in the corridor. The buyer therefore pays less than the cost of a full variance ...

The warrant price fluctuated in a range based on the arbitrage-free hypothesis. However, in the actual transaction, the warrant price will deviate the price range because of the investor sentiment, sometimes the deviation is too far that the actual price breaks the lower limit based on the arbitrage-free hypothesis, which make the market some arbitrage opportunities. The buyers’ strength and th...

Most investment treaties contain two dispute resolution clauses: one permitting investor-state arbitration for investment disputes and the other permitting state-to-state arbitration for disputes concerning the treaty’s interpretation and/or application. Despite this duality, the potential role of state-to-state arbitration, and its proper relationship with investor-state arbitration, have larg...

During the recent financial crisis, more than 30% of hedge fund managers used their discretion to restrict investor liquidity through the use of “gates” or “side pockets.” Using a database of hedge fund investor interests, this paper is the first to empirically examine the determinants of these discretionary liquidity restrictions (DLRs) and their consequences for hedge fund investors. We find ...