What if we knew what the future brings? Optimal investment for a frontrunner with price impact

Peter Bank, Yan Dolinsky and Mikl\'os R\'asonyi

Papers from arXiv.org

Abstract: In this paper we study optimal investment when the investor can peek some time units into the future, but cannot fully take advantage of this knowledge because of quadratic transaction costs. In the Bachelier setting with exponential utility, we give an explicit solution to this control problem with intrinsically infinite-dimensional memory. This is made possible by solving the dual problem where we make use of the theory of Gaussian Volterra integral equations.

Date: 2021-08, Revised 2022-05
New Economics Papers: this item is included in nep-isf and nep-upt
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2108.04291

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