2025/03/15 by Bank, Peter, Dolinsky, Yan
#500 Naturwissenschaften und Mathematik::510 Mathematik::510 Mathematik #duality #exponential utility maximization #noisy price signals #optimal control with partial observation #temporary price impact
paper · doi:10.14279/depositonce-22627
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.