Optimal investment problem with M-CEV model: closed form solution and applications to the algorithmic trading

Dmitry Muravey

Papers from arXiv.org

Abstract: This paper studies an optimal investment problem under M-CEV with power utility function. Using Laplace transform we obtain explicit expression for optimal strategy in terms of confluent hypergeometric functions. For obtained representations we derive asymptotic and approximation formulas contains only elementary functions and continued fractions. These formulas allow to make analysis of impact of model's parameters and effects of parameters misspecification. In addition we propose some extensions of obtained results that can be applicable for algorithmic strategies.

Date: 2017-03, Revised 2018-07
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1703.01574

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