UPDATE to the 2nd seminar by Jacek Krawczyk. Please, note the change of date. TITLE: The Role of Payoff Distribution in Dynamic Portfolio Management, Part 2 TIME: 3PM, November 19, 2019, 2PM VENUE: RC829 Robustness of cautious-relaxed investment policies to target contingency and selfish manager preferences. A cautious-relaxed investment policy is one which optimises a target-based kinked utility measure. A cautious-relaxed investment policy can generate a left (negatively) skewed payoff distribution that helps people form strong expectations of a satisfactory final payoff. This means that applying a cautious-relaxed investment policy will help avoid frequently obtaining low returns - so, losses - and at the same time promises higher payoffs with greater certainty. The question then arises as to what extent are such strategies realistic in the presence of e.g., target variation and inflation, fund manager selfishness or transaction costs. In my presentation, I will use a computational method (âSOCSolâ) to find approximately optimal decision rules and the corresponding payoff distributions for several such cases. Therefore the reported results will be parameter specific. The effect of varying the payoff target on the payoff distribution is that increasing the target causes the distribution to become less left skewed, causing higher probabilities of loss; even if the fund manager’s explicit preferences differ from the investorâs, the latterâs payoff should not suffer; in case the target is contingent on an exogenous stochastic process the payoff distribution depends on a correlation between inflation and the risky asset price.