Financial Math: Portfolio Optimization and Dynamic Programming

Group Members

Ayelet Amiran, Skylyn Brock, Ryan Craver, Ugonna Ezeaka, Mary Wishart

Supervisors

Fabrice Baudoin, Berend Coster, Phanuel Mariano

 

Overview

Financial markets obviously have asymmetry of information. That is, there are different type of traders whose behavior is induced by different types of information that they possess. Let us consider a “small” investor who trades in a arbitrage free financial market so as to maximize the expected utility of her wealth at a given time horizon. We assume that she possesses extra information about the future price of a stock. Our basic question is: What is the value of this information ?

To answer the question, we will consider some standard basic discrete models of financial markets, like binomial trees and solve the portfolio optimization problem with asymmetry of information by developing  dynamic programming tools.

Publication

arXiv:1808.03186

Presentation

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Poster

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