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An approximation scheme for the optimal investment strategy in incomplete market

 

When 17.00 on Thursday 24th February 2011
Where NAB 1.09, New Academic Building 
Presentations  
Speaker Sergey Nadtochiy
From Oxford University
Abstract

Characterizing and constructing the solutions to stochastic optimization problems of optimal portfolio choice is a long standing problem. In this talk, I will discuss a new method based on a splitting scheme for the associated Hamilton-Jacobi-Bellman equation in a two-factor stochastic volatility model for the stock price. The scheme converges to a solution of the corresponding PDE, and yields an explicit uniform approximation of the optimal investment strategy. This solution approach offers, among others, insightful observations on how market incompleteness is processed and how it affects the 'infinitesimal' investment preferences. This is joint work with Thaleia Zariphopoulou.

 

For further information Sabina Allam (Postgraduate Administrator) Ext. 6879
Department of Statistics, Columbia House
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