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Math Colloquium
Johannes Muhle-Karbe
University of Michigan
Title: Portfolio Choice with Small Frictions

Abstract: Portfolio-Choice Problems are a crucial part of financial theory, both on their own right and as building blocks for equilibrium models. Yet, except for very particular asset dynamics and preferences, such stochastic optimization problems are hopelessly intractable, and these issues are of course only compounded if frictions such as transaction costs are taken into account. As a way out, one often can apply asymptotic methods to reveal the salient features of the solution. This means that one views the model at hand as a perturbation of a simpler benchmark model and then tries to compute correction terms that account for the perturbation in an asymptotically optimal manner. In this talk, I outline recent results that provide explicit asymptotic solutions for a wide range of such problems.

Date: Monday, April 17, 2017
Time: 4:30 pm
Location: Wean Hall 8220
Submitted by:  Shreve
Note: Refreshments at 4:00 pm, Wean Hall 6220