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)
Event Details
Asymptotic Analysis for Optimal Investment with Transaction Costs in Finite Time
- Event Date: March 29, 2011
- Event End Date: March 29, 2011
- Event Start Time: 10:30 AM
- Event End Time: 11:30 AM
- Event Location: Hill 705
- Event Type: Mathematical Finance and Probability Seminars
- Extra Info: Speaker: Maxim Bichuch, Princeton University (ORFE)