McGill University, December 4 - 7, 2015
If time permits we some non linear multivariate time series models.
The main part of this work was done with a recent student Yi Xi. Some other parts of this work were done with Hao Yu, Alex Badescu, Weibin Jiang and Zi Zhen Liu.
Joint work with Deniz Sezer(UCalgary)
We focus on a maximization of expected utility from terminal wealth problem, providing, in a logarithmic utility setting, the optimal investment strategy in explicit form, both under full (i.e., from the insider point of view) and under partial information (i.e., from the standard investor viewpoint). We test our results on real market data relative to Enron and Ahold.
The three main contributions of this paper are: the introduction of a new market model dealing with over and under-reaction to news, the explicit computation of the optimal filter dynamics using an approach based on enlargement of filtrations and the application of the optimal portfolio allocation rule to real market data in both full and partial information setting.