Abstract
We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock’s price fluctuations. With linear temporary price impact the resulting optimal investment problem with exponential utility turns out to be not only well posed, but it even allows for a closed-form solution. We describe this solution and the resulting problem value for this stochastic control problem with partial observation by solving its convex-analytic dual problem.
| Original language | English |
|---|---|
| Article number | 35 |
| Journal | Applied Mathematics and Optimization |
| Volume | 89 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 2024 |
Keywords
- Duality
- Exponential utility maximization
- Noisy price signals
- Optimal control with partial observation
- Temporary price impact
All Science Journal Classification (ASJC) codes
- Control and Optimization
- Applied Mathematics
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