Fri, 15 Nov 2013
16:00 -
17:00
L4
Portfolio optimization under partial information with expert opinions: a dynamic programming approach
Rudiger Frey
(Institute for Statistics and Mathematics of the Vienna University for Economics and Business (WU))
Abstract
We study optimal portfolio strategies in a market
where the drift is driven by an unobserved Markov chain. Information on
the state of this chain is obtained from stock prices and from expert
opinions in the form of signals at random discrete time points. We use
stochastic filtering to transform the original problem into an
optimization problem under full information where the state variable is
the filter for the Markov chain. This problem is studied with dynamic
programming techniques and with regularization arguments. Finally we
discuss a number of numerical experiments