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     Department of Systems Engineering and Engineering Management

                    The Chinese University of Hong Kong

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Date: Wednesday, October 21, 2026, 4:30pm to 5:30pm HKT

Venue: ERB 909, The Chinese University of Hong Kong

Title:  A Variational Approach to Portfolio Choice

Speaker: Prof. Paolo Guasoni, Dublin City University

Abstract:

We develop a variational approach to infinite-horizon consumption and portfolio choice for isoelastic investors with any number of assets and stochastic investment opportunities driven by a scalar diffusion. The variational formulation selects the value function without prescribed boundary values, supports rigorous verification, and applies in complete and incomplete markets. It yields consumption-smoothing identities, policy bounds, convergence guarantees, and tail comparisons between optimal and myopic policies. A discretization produces reproducible solutions for models with nonlinear return predictability, state-dependent Sharpe ratios, and interest-rate risk. The numerical results show that intertemporal smoothing can reverse consumption rankings in risk aversion and make hedging demand nonmonotone.

Biography:

Paolo Guasoni holds the Stokes Chair in Financial Mathematics at Dublin City University since 2009 and a Professorship at the University of Bologna. His research investigates the effects of market frictions, incentives, and preferences in portfolio choice and asset pricing, and has appeared in Annals of Applied Probability, Finance and Stochastics, Journal of Financial Economics, Management Science, Mathematical Finance, and the SIAM Journal on Financial Mathematics. He has been funded by the European Research Council, the National Science Foundation, and Science Foundation Ireland.

Everyone is welcome to attend the talk!

SEEM-5201 Website: http://seminar.se.cuhk.edu.hk