Quotation Altay, Sühan, Eksi-Altay, Zehra, Colaneri, Katia. 2019. Portfolio optimization for a large investor controlling market sentiment under partial information. SIAM Journal on Financial Mathematics. 10 (2), 512-546.


RIS


BibTeX

Abstract

We study a portfolio optimization problem for an investor whose actions have an indirect impact on prices. We consider a market model with a risky asset price process following a pure-jump dynamics with an intensity modulated by an unobservable continuous-time finite-state Markov regime-switching process. We assume that decisions of the investor affect the generator of the regime-switching process which results in an indirect impact on the price process. Using filtering theory, we reduce this problem with partial information to one with full information and solve it for logarithmic and power utility preferences. In particular, we apply control theory for piecewise deterministic Markov processes to derive the optimality equation. Finally, we provide an example with a two-state Markov regime-switching process and discuss how an investor's ability to control the intensity of it affects optimal portfolio strategies as well as the optimal wealth under full and partial information.

Tags

Press 'enter' for creating the tag

Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal SIAM Journal on Financial Mathematics
Citation Index SSCI
Language English
Title Portfolio optimization for a large investor controlling market sentiment under partial information
Volume 10
Number 2
Year 2019
Page from 512
Page to 546
Reviewed? Y
URL https://epubs.siam.org/doi/abs/10.1137/17M1134317
DOI https://doi.org/10.1137/17M1134317
Open Access N

Associations

People
Altay, Sühan (Details)
Eksi-Altay, Zehra (Details)
Colaneri, Katia (Former researcher)
Organization
Institute for Statistics and Mathematics IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1118 Probability theory (Details)
1137 Financial mathematics (Details)
Google Scholar: Search