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      Department of Systems Engineering and Engineering Management

                             The Chinese University of Hong Kong

 

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Date: 4:30pm to 5:30pm, May 10, 2017 (Wednesday)

 

Title: Hedging with temporary price impact

 

Speaker: Professor Peter Bank, Berlin University of Technology

 

Abstract:

 

We discuss how to optimally track a fluctuating target position (such as a Black-Scholes hedging portfolio) when transactions incur quadratic costs. For a model with constant coefficients, we provide a closed form solution for the optimal policy and the s value. Our solution makes transparent the costs which arise from a target whose evolution is difficult to predict and provides a characterization of those ultimate target positions which can be attained almost surely at finite expected costs. A key role is played by a novel signal process whose general structure as weighted averages of future target positions is preserved also in models with stochastic coefficients. This is joint work with Mete Soner and Moritz Voss.

 

Biography:

 

After his Ph.D. with Hans Föllmer in 2000, Peter Bank continued as a postdoc and then Assistant Professor at Humboldt University of Berlin. In 2004 he joined Columbia University's Department of Mathematics on a tenure track and left as an Associate Professor in 2007 to become Full Professor at Berlin University of Technology.  Peter's research focusses on probabilistic structures arising in stochastic optimal control problems from Mathematical Finance. He serves currently as Associate Editor for Mathematics and Financial Economics, SIAM Journal on Financial Mathematics and Applied Mathematical Finance.

 

This talk is hosted by Prof. Chen, Nan.

 

Everyone is welcome to attend the talk!

 

 

Venue: Room 513,

      William M.W. Mong Engineering Building (ERB),

      The Chinese University of Hong Kong.

 

SEEM-5202 Website: http://seminar.se.cuhk.edu.hk

Email: seem5202@se.cuhk.edu.hk