IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03252482.html
   My bibliography  Save this paper

Portfolio choice, portfolio liquidation, and portfolio transition under drift uncertainty

Author

Listed:
  • Alexis Bismuth

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, SMTH - Service étude et Modélisation en ThermoHydraulique - CEA-DES (ex-DEN) - CEA-Direction des Energies (ex-Direction de l'Energie Nucléaire) - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

  • Olivier Guéant

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Jiang Pu

    (Institut europlace de finance)

Abstract

This paper presents several models addressing optimal portfolio choice, optimal portfolio liquidation, and optimal portfolio transition issues, in which the expected returns of risky assets are unknown. Our approach is based on a coupling between Bayesian learning and dynamic programming techniques that leads to partial differential equations. It enables to recover the well-known results of Karatzas and Zhao in a framework à la Merton, but also to deal with cases where martingale methods are no longer available. In particular, we address optimal portfolio choice, portfolio liquidation, and portfolio transition problems in a framework à la Almgren–Chriss, and we build therefore a model in which the agent takes into account in his decision process both the liquidity of assets and the uncertainty with respect to their expected return.

Suggested Citation

  • Alexis Bismuth & Olivier Guéant & Jiang Pu, 2019. "Portfolio choice, portfolio liquidation, and portfolio transition under drift uncertainty," Post-Print hal-03252482, HAL.
    • Handle: RePEc:hal:journl:hal-03252482
    DOI: 10.1007/s11579-019-00241-1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Felix Dammann & Giorgio Ferrari, 2023. "Optimal execution with multiplicative price impact and incomplete information on the return," Finance and Stochastics, Springer, vol. 27(3), pages 713-768, July.
    2. Felix Dammann & Giorgio Ferrari, 2022. "Optimal Execution with Multiplicative Price Impact and Incomplete Information on the Return," Papers 2202.10414, arXiv.org, revised Nov 2022.
    3. Dongmei Zhu & Harry Zheng, 2022. "Effective Approximation Methods for Constrained Utility Maximization with Drift Uncertainty," Journal of Optimization Theory and Applications, Springer, vol. 194(1), pages 191-219, July.
    4. Andrea Mazzon & Peter Tankov, 2024. "Optimal stopping and divestment timing under scenario ambiguity and learning," Papers 2408.09349, arXiv.org, revised Oct 2024.
    5. Horst, Ulrich & Xia, Xiaonyu & Zhou, Chao, 2021. "Portfolio Liquidation under Factor Uncertainty," Rationality and Competition Discussion Paper Series 274, CRC TRR 190 Rationality and Competition.
    6. Fayc{c}al Drissi, 2022. "Solvability of Differential Riccati Equations and Applications to Algorithmic Trading with Signals," Papers 2202.07478, arXiv.org, revised Aug 2023.
    7. Dammann, Felix & Ferrari, Giorgio, 2022. "Optimal Execution with Multiplicative Price Impact and Incomplete Information on the Return," Center for Mathematical Economics Working Papers 663, Center for Mathematical Economics, Bielefeld University.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03252482. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.