View Proposal #295
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ID | 295 |
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First Name | Ranojoy |
Last Name | Basu |
Institution | Iowa State University |
Speaker Category | graduate student |
Title of Talk | Expected Utility Maximization in an Optimal stopping Environment |
Abstract | In this paper we study an investment problem where an investor has the option to invest in a risk free asset (such as a bank account ) and a risky asset. His wealth can be transferred between the two assets and there are no transaction costs. The proportion of wealth in the risky asset is a priori chosen deterministic function of wealth. The objective is to …nd an optimal quitting time which maximizes the expected discounted utility from terminal wealth. First, we consider a situation when the wealth process is not subject to bankruptcy and obtain an optimal quitting time. Second, we consider the more realistic scenario when an investor’s wealth is subject to default. We develop necessary mathematical techniques to obtain an optimal selling time in both the circumstances. In both cases, it turned out that the optimal selling time is of threshold type. Numerical methods can easily be implemented to compute the optimal threshold. |
Subject area(s) | Mathematical Finance |
Suitable for undergraduates? | Yes |
Day Preference | |
Computer Needed? | Y |
Bringing a laptop? | Y |
Overhead Needed? | Y |
Software requests | |
Special Needs | |
Date Submitted | 10/15/2010 |
Year | 2010 |