Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

We consider an agent who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of a proportional transaction cost. We will consider the case when the utility function is a power function. We provide a heuristic and a rigorous derivation of the asymptotic expansion of the value function in powers of the transaction cost. We also obtain a "nearly optimal" strategy, whose utility asymptotically matches the leading terms in the value function.

Speaker: Maxim Bichuch, Princeton University (ORFE)

Slides: (TBA)