Quotation Frey, Rüdiger, Gabih, Abdelali, Wunderlich, Ralf. 2012. Portfolio optimization under partial information with expert opinions. International Journal of Theoretical and Applied Finance 15 (1): 1250009-1-18.


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Abstract

This paper investigates optimal portfolio strategies in a market with partial information on the drift. The drift is modelled as a function of a continuous-time Markov chain with finitely many states which is not directly observable. Information on the drift is obtained from the observation of stock prices. Moreover, expert opinions in the form of signals at random discrete time points are included in the analysis. We derive the filtering equation for the return process and incorporate the filter into the state variables of the optimization problem. This problem is studied with dynamic programming methods. In particular, we propose a policy improvement method to obtain computable approximations of the optimal strategy. Numerical results are presented at the end.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal International Journal of Theoretical and Applied Finance
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-D, WH-B
Language English
Title Portfolio optimization under partial information with expert opinions
Volume 15
Number 1
Year 2012
Page from 1250009-1
Page to 18
URL http://econpapers.repec.org/article/wsiijtafx/v_3a15_3ay_3a2012_3ai_3a01_3ap_3a1250009-1-1250009-18.htm

Associations

People
Frey, Rüdiger (Details)
External
Gabih, Abdelali
Wunderlich, Ralf
Organization
Institute for Statistics and Mathematics IN (Details)
Institute for Finance, Banking and Insurance IN (Details)
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