Abstract
This study addresses an investment problem facing a venture fund manager who has a non-smooth utility function. The theoretical model characterizes an absolute performance-based compensation package. Technically, the research methodology features stochastic control and optimal stopping by formulating a free-boundary problem with a nonlinear equation, which is transferred to a new one with a linear equation. Numerical results based on simulations are presented to better illustrate this practical investment decision mechanism.
| Original language | English |
|---|---|
| Pages (from-to) | 81-96 |
| Number of pages | 16 |
| Journal | Journal of Industrial and Management Optimization |
| Volume | 13 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - Jan 2019 |
Keywords
- Dual transformation
- Free boundary
- Non-smooth utility
- Optimal investment
- Optimal stopping
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management
- Control and Optimization
- Applied Mathematics