Portfolio choice, portfolio liquidation, and portfolio transition under drift uncertainty

Alexis Bismuth, Olivier Gu\'eant and Jiang Pu

Papers from arXiv.org

Abstract: This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling between Bayesian learning and dynamic programming techniques that leads to partial differential equations. It enables to recover the well-known results of Karatzas and Zhao in a framework \`a la Merton, but also to deal with cases where martingale methods are no longer available. In particular, we address optimal portfolio choice, portfolio liquidation, and portfolio transition problems in a framework \`a la Almgren-Chriss, and we build therefore a model in which the agent takes into account in his decision process both the liquidity of assets and the uncertainty with respect to their expected return.

Date: 2016-11, Revised 2019-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://arxiv.org/pdf/1611.07843 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1611.07843

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().