Optimizing Portfolios with Liquidity Risk
<-- Return to the list
Date: 10-03-2006
Start Time:
1:00pm
End Time: 2:00pm
Speaker: John Birge, University of Chicago
Location: Mudd 303
Abstract
Liquidity risk poses a challenge for dynamic portfolio optimization due to potential non-convexities and state complexity, caused for example by vesting periods, varying lock-out restrictions, and advance-notice requirements. Ignoring liquidity concerns, especially no-trade constraints, can also lead to substantial sub-optimality. In this talk, I will discuss the nature of the differences in optimal portfolios that consider liquidity risks and will present approximations of the state and value function that allow for efficient computation.
Bio
John Birge is the Jerry W. and Carol Lee Levin Professor of Operations Management at the University of Chicago Graduate School of Business. He was Dean of the Robert R. McCormick School of Engineering and Applied Science and Professor of Industrial Engineering and Management Sciences at Northwestern University from 1999 to 2004. He is a Past President of INFORMS and was Professor and Chair of Industrial and Operations Engineering at the University of Michigan, where he also established the University of Michigan Financial Engineering Program. He has held visiting appointments at the International Institute for Applied Systems Analysis in Vienna, Austria, the Naval Postgraduate School in Monterey, California, the University of New South Wales in Sydney, Australia, and Dalhousie University in Halifax, Nova Scotia. His work considers the engineering of practical systems in which some outcomes are not completely known before decisions must be made. He has worked for and been a consultant to a number of organizations, including Deutsche Bank, General Motors, Chrysler Corporation, Volkswagen, Detroit Edison, Herman Miller, TRW, Schlumberger, the Michigan State Senate, the Michigan State Police Troopers Association, and the Comision de Regulacion de Energia y Gas in Colombia. He is former Editor-in-Chief of Mathematical Programming, Series B, and serves on several editorial boards.