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Probability and Computational Finance Seminar
Johannes Muhle-Karbe
Michigan University
Title: Portfolio Choice with Small Nonlinear Price Impact

Abstract: We study portfolio choice in the presence of small nonlinear price impact proportional to a power of the order flow. For general asset price and cost dynamics, we derive an asymptotically optimal policy and the associated welfare loss due to price impact. Unlike for linear price impact and optimal execution algorithms, the optimal trading speed also depends on the volatility of the frictionless target strategy here, in addition to risk aversion, price impact, and market volatility. (This is joint work with Thomas Caye and Martin Herdegen.)

Date: Monday, April 18, 2016
Time: 4:30 pm
Location: Wean Hall 8220
Submitted by:  Kasper Larsen