Guiyuan Ma

Xi'an Jiaotong University | XJTU ·  School of Economics and Finance

We derive a closed-form solution to a continuous-time optimal portfolio selection problem with return predictability and transaction costs. Specially, we assume that asset returns are driven by stochastic signals, and that transaction costs are of quadratic form. The agent chooses a trading strategy to maximize the expected exponential utility of h...

In this paper, we provide a closed-form solution to an optimal portfolio execution problem with stochastic price impact and stochastic net demand pressure. Specifically, each trade of an investor has temporary and permanent price impacts, both of which are driven by a continuous-time Markov chain; whereas the net demand pressure from other inventor...

In this article, we develop a novel dynamic model to study the role and effect of relative performance evaluation (RPE) in a delegated portfolio management framework, where a non-zero-sum game is introduced among managers in addition to the hierarchical Stackelberg game between the shareholders and managers. The characterization of the optimal cont...

We study a dynamic mean–variance portfolio selection problem with return predictability and trading frictions from price impact. Applying mean-field type control theory, we provide a characterisation of an equilibrium trading strategy for an investor facing stochastic investment opportunities. An explicit equilibrium strategy is derived in terms of...

This paper studies a dynamic asset-liability management problem of a company with market frictions. Specifically, the asset prices are modeled by a multivariate geometric Brownian motion with their excess returns driven by some correlated stochastic signals; and the liability process is modeled by another geometric Brownian motion correlated to the...

This paper investigates the strategic interaction of information acquisition, information-based dynamic trading, and noise trading patterns, as well as its significant implications on market equilibrium outcomes. We consider a market where the strategic trader can dynamically acquire costly information about an asset’s payoff via private signals in...

This paper studies the valuation of general contingent claims with short selling bans under the equal-risk pricing (ERP) framework proposed in I. Guo & S.-P. Zhu (2017) [Journal of Economic Dynamics and Control 76, 136–151]. In existing literature, analytical pricing formulae were derived in the special case, where the payoff function is monotonic...

This paper studies a portfolio choice problem of a utility-maximizing investor with return predictability and small liquidity costs. By adopting a logarithmic-return assumption, our asymptotic expansion around small liquidity costs provides closed-form expressions for the first-order approximation of the value function and the associated almost-opt...

This paper revisits the classical Merton problem on the finite horizon with the constant absolute risk aversion utility function. We apply two different methods to derive the closed-form solution of the corresponding Hamilton–Jacobi–Bellman (HJB) equation. An approximating method consists of two steps: solve the HJB equation with the hyperbolic abs...

This paper studies a robust portfolio optimization problem under a multi-factor volatility model. We derive optimal strategies analytically under the worst-case scenario with or without derivative trading in complete and incomplete markets and for assets with jump risk. We extend our study to the case with correlated volatility factors and propose...

In this paper, we adopt a monotone numerical scheme to solve the Hamilton–Jacobi–Bellman equation arising from the optimal portfolio selection problem with general utility functions. To explore the relationship between the relative risk aversion and optimal investment strategy, three different examples are presented with a constant relative risk av...

This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without derivative trading. To illustrate the effects of ambiguity, we compare our optimal robust strategy with some strateg...

Guo and Zhu (2017) recently proposed an equal-risk pricing approach to the valuation of contingent claims when short selling is completely banned and two elegant pricing formulae are derived in some special cases. In this paper, we establish a unified framework for this new pricing approach so that its range of application can be significantly expa...

We provide a closed-form solution to an optimal investment and consumption problem for a constant absolute risk aversion (CARA) agent, who faces execution costs when trading correlated risky assets with return predictability. The optimal investment strategy indicates that the agent should trade gradually toward a dynamic aim portfolio, which is an...

This paper studies European call option pricing problem under a hard-to-borrow stock model where stock price and buy-in rate are fully coupled. Avellaneda and Lipkin (2009) proposed a simplified solution approach with an independence assumption, and then derived a semi-explicit pricing formula. However, such an approach has limited its application...

In this paper, we study the effects of cointegration on optimal investment and consumption strategies for an investor with exponential utility. A Hamilton-Jacobi-Bellman (HJB) equation is derived first and then solved analytically. Both the optimal investment and consumption strategies are expressed in closed form. A verification theorem is also es...

We provide a closed-form solution to an optimal investment and consumption problem for a constant absolute risk aversion (CARA) agent, who faces execution costs when trading risky assets with return predictability. The optimal investment strategy indicates that the agent should trade gradually toward a dynamic aim portfolio, which is an adjusted Me...

In this paper, an analytical solution for the well-known HJB (Hamilton-Jacobi-Bellman) equation that arises from the Merton problem subject to general utility functions is presented for the first time. The solution presented in this paper is written in the form of a Taylor's series expansion and constructed through the homotopy analysis method (HAM...

While a classic result by Merton (1973, Bell J. Econ. Manage. Sci. , 141–183) is that one should never exercise an American call option just before expiration if the underlying stock pays no dividends, the conclusion of a very recent empirical study conducted by Jensen and Pedersen (2016, J. Financ. Econ.121 (2), 278–299) suggests that one should ‘...

In 2009, Avellaneda and Lipkin (A&L) proposed a dynamic model for hard-to-borrow stocks, in which the stock price and the buy-in rate, an additional factor introduced by them, are fully coupled. In order to obtain a semi-explicit pricing formula for European call options, A&L had to make an independence assumption which has facilitated the derivati...