Research seminar by Mihail Zervos (LSE): «Buy-low and sell-high investment strategies»

Mihail Zervos

Thursday, November 18 ICEF held the Research seminar.
Venue: Pokrovski Bulvar, 11, Room Zh-822
Speaker: Mihail Zervos (LSE)
Theme: «Buy-low and sell-high investment strategies»

 

Abstract: Buy-low and sell-high investment strategies are a recurrent theme in the considerations of many investors. In this paper, we consider an investor who aims at maximising the expected discounted cash-flow that can be generated by sequentially buying and selling one share of a given asset at fixed transaction costs. We model the underlying asset price by means of a general one-dimensional Ito diffusion X, we solve the resulting stochastic control problem in a closed analytic form, and we completely characterise the optimal strategy. In particular, we show that, if 0 is a natural boundary point of X, e.g., if X is a geometric Brownian motion, then it is never optimal to sequentially buy and sell. On the other hand, we prove that, if 0 is an entrance point of X, e.g., if X is a mean-reverting constant elasticity of variance (CEV) process, then it may be optimal to sequentially buy and sell, depending on the problem data. 

Everyone interested is welcome to attend!

Pass can be ordered by:
tel. (495)772-95-90*2659
e-mail: ksanzharovskaya@hse.ru
contact: Ksenia Sanzharovskaya

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