Utility maximization with periodic evaluations


    Department of Systems Engineering and Engineering Management

                        The Chinese University of Hong Kong


Date: Thursday, November 30, 2023, 4:30 pm to 5:30 pm HKT

Venue: ERB 513, The Chinese University of Hong Kong

Title: Utility maximization with periodic evaluations

Speaker: Prof. Harry Zheng, Imperial College London



We present a continuous-time portfolio selection problem faced by an agent with S-shaped preference who maximizes the utilities derived from the portfolio's periodic performance over an infinite horizon. The periodic reward structure creates subtle incentive distortion. In some cases, local risk aversion is induced which discourages the agent from risk taking in the extreme bad states of the world. In some other cases, eventual ruin of the portfolio is inevitable and the agent underinvests in the good states of the world to manipulate the basis of subsequent performance evaluations. We outline several important elements of incentive design to contain the long-term portfolio risk. (Joint work with Alex  S.L. Tse)



Harry Zheng is a professor of mathematics at Imperial College London. His research is in the area of stochastic control, convex optimization, applied probability, and mathematical finance. He has published papers broadly in operational research, financial economics, and mathematics journals, such as OR, MOR, SICON, MF, see for details.


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Thursday, November 30, 2023 - 16:30