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Probability and Computational Finance Seminar
Phillip Ernst
U Penn
Title: How to Retire Early

Abstract: We pose an optimal control problem arising in a perhaps new model for retirement investing. Given a control function f and our current net worth as X(t) for any t, we invest an amount f(X(t)) in the market. We need a fortune of M "superdollars" to retire and want to retire as early as possible. We model our change in net worth over each in finitesimal time interval by the Ito process dX(t) = (1 + f(X(t))dt + f(X(t))dW(t). We show how to choose the optimal f = f_0 and show that the choice of f_0 is optimal among all nonanticipative investment strategies, not just among Markovian ones.

Date: Monday, February 3, 2014
Time: 5:00 pm
Location: Wean Hall 8427
Submitted by:  Kasper Larsen