SMS scnews item created by Anna Aksamit at Wed 30 Sep 2020 1339
Type: Seminar
Distribution: World
Expiry: 14 Oct 2020
Calendar1: 6 Oct 2020 1500-1600
CalLoc1: zoom talk
Auth: aksamit@ (aaks9559) in SMS-WASM

Stochastics and Finance: Guiyuan Ma -- Optimal portfolio execution problem with stochastic price impact

Dear All, 

You are kindly invited to attend the next Stochastics and Finance seminar.  On Tuesday
October 6 at 3pm (Sydney time) Guiyuan Ma will give a talk via Zoom.  

Zoom link: 

Speaker: Dr Guiyuan Ma (Xi’an Jiaotong University) 

Title: Optimal portfolio execution problem with stochastic price impact 

Abstract: In this paper, we provide a closed-form solution to an optimal portfolio
execution problem with stochastic price impact and stochastic net demand pressure.
Specifically, each trade of an investor has temporary and permanent price impacts, both
of which are driven by a continuous-time Markov chain; whereas the net demand pressure
from other inventors is modelled by an Ornstein-Uhlenbeck process.  The investor
optimally liquidates his portfolio to maximize his expected revenue netting his
cumulative inventory cost over a finite time.  Such a problem is first reformulated as
an optimal stochastic control problem for a Markov jump linear system.  Then, we derive
the value function and the optimal feedback execution strategy in terms of the solutions
to coupled differential Riccati equations.  Under some mild conditions, we prove that
the coupled system is well-posed, and establish a verification theorem.  Financially,
our closed-form solution shows that the investor optimally liquidates his portfolio
towards a dynamic benchmark.  Moreover, the investor trades aggressively
(conservatively) in the state of low (high) price impact. 

Please feel free to forward this message to anyone who might be interested in this

Kind regards, 


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