Optimal Investment with a Noisy Signal of Future Stock Prices

Peter Bank; Yan Dolinsky

doi:10.1007/s00245-023-10099-x

Optimal Investment with a Noisy Signal of Future Stock Prices

Peter Bank^*
, Yan Dolinsky

^*Corresponding author for this work

Department of Statistics

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock’s price fluctuations. With linear temporary price impact the resulting optimal investment problem with exponential utility turns out to be not only well posed, but it even allows for a closed-form solution. We describe this solution and the resulting problem value for this stochastic control problem with partial observation by solving its convex-analytic dual problem.

Original language	English
Article number	35
Journal	Applied Mathematics and Optimization
Volume	89
Issue number	2
DOIs	https://doi.org/10.1007/s00245-023-10099-x
State	Published - Apr 2024

Bibliographical note

Publisher Copyright:
© 2024, The Author(s).

Keywords

Duality
Exponential utility maximization
Noisy price signals
Optimal control with partial observation
Temporary price impact

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10.1007/s00245-023-10099-x

Cite this

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Optimal Investment with a Noisy Signal of Future Stock Prices

Abstract

Bibliographical note

Keywords

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