401-4914-12L Optimal Portfolio Choice in Markets with Frictions
Semester | Spring Semester 2012 |
Lecturers | J. Muhle-Karbe |
Periodicity | non-recurring course |
Language of instruction | English |
Abstract | In his seminal work in the late sixties and early seventies, Robert Merton explicitly determined optimal portfolios for several classes of risk averse agents trading dynamically in frictionless financial markets. In this lecture, we will consider extensions taking into account market frictions such as transaction costs, illiquidity, and parameter uncertainty. |
Objective | This course will provide an advanced introduction to portfolio choice problems in the presence of different market frictions. We will introduce different mathematical solution techniques from stochastic control and martingale theory. In addition, we will also discuss the economic implications of the results. |
Lecture notes | Not available. |
Literature | Robert Merton (1969): Lifetime Portfolio Selection under Uncertainty. Available at Link Stefan Gerhold, Paolo Guasoni, Johannes Muhle-Karbe, and Walter Schachermayer (2011): Transaction Costs, Trading Volume, and the Liquidity Premium. Available at Link More references will be announced in the lecture. |
Prerequisites / Notice | Mathematical Finance and Stochastic Processes. |