Title

Periodic portfolio selection with quasi-hyperbolic discounting

Abstract

In this talk, I will introduce a continuous-time portfolio selection problem faced by an agent with S-shaped preference who maximises the discounted utilities derived from the portfolio’s periodic performance over an infinite horizon. The underlying discount function is quasi-hyperbolic which induces time-inconsistency. I will introduce different notions of optimality for agent who is “pre-committed”, “naive” and “sophisticated” and outline the respective solution methods. The more mathematically interesting case arises when the agent is sophisticated who seeks a consistent planning strategy. Such problem can be analysed via a static mean field game where theoretical characterisation of the optimal strategy is provided.

Bio

Dr Alex Tse is a lecturer at the financial mathematics group of University College London. His research areas include stochastic control, optimal stopping and their applications to financial economics. He received his PhD from Warwick in 2017. He was previously a postdoc at Cambridge, a Chapman Fellow at Imperial, and a lecturer at University of Exeter Business School. Before his PhD study, he has been working at the equity derivatives trading team of the Australia and New Zealand Banking Group.