School Seminars and Colloquia

Optimal Portfolio Selection when Stock Price Returns Follow Jump-Diffusions

School Seminar

by Daniel Michelbrink


Institution: University of Nottingham
Date: Thu 4th December 2008
Time: 1:30 PM
Location: MEDICAL BLG, ESJ King Theatre (Rm W312, Flr 3), UOM

Abstract: We consider an investor who wishes to maximise expected utility from terminal wealth and consumption.
The investor can thereby invest into a stock or a riskless bond. The problem has been solved for the classical Black-Scholes model but turns out to be more difficult in case that the stock returns follow a jump diffusion process.
For this kind of problems one usually tries to find a solution either by using a martingale approach or by using stochastic control. In case of stochastic control one has to solve a PDE (or PIDE) - the Hamilton-Jacobi-Bellman equation - whereas in case of the martingale approach one uses various stochastic calculus tools to get a solution. In the talk we focus on the martingale approach, but also compare some concrete examples with the stochastic control solutions.

For More Information: Daniel Dufresne dufresne@unimelb.edu.au