Portfolio optimization in jump models with nonlinear wealth dynamics.

SPEAKER: Rafael Serrano

Universidad del Rosario

ABSTRACT

We explore martingale and convex duality techniques to study optimal investment strategies that maximize expected risk-averse utility from consumption and terminal wealth. We consider a market model with jumps driven by (multivariate) marked point processes and so-called non-linear wealth dynamics. This allows to take account of relaxed assumptions such as differential borrowing and lending interest rates and/or short positions with cash collateral and negative rebate rates. We give sufficient conditions for existence of optimal policies for agents with logarithmic and CRRA power utility. We find closed-form solutions for the optimal value function in the case of pure-jump models with jump-size distributions modulated by a two-state Markov chain.

DATE:  Wednesday, August 26 th, 2015
TIME:  6:00 pm

CLASSROOM: A601