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Reference Point Adapted Optimal Dynamic Portfolio Policy


Academic report


Report title:Reference Point Adapted Optimal Dynamic Portfolio Policy


Reporter:Prof. LI Duan (The Chinese University of Hong Kong)  


Report time:October 21, 2016 AM 10:00-11:00


Location:A1101#room, Innovation Park Building 


Contact:Prof. ZHANG Liwei (tel:8478351-8118)



Abstract:We formalize the reference point adaptation process by relating it to a way people perceive prior gains and losses, either recursively or non-recursively. We then develop dynamic trading models with reference point adaptation and loss aversion, and derive their semi-analytical solutions. The derived optimal stock holding has an asymmetric V-shaped form with respect to prior outcomes. We demonstrate how reference point adaptation sheds light on some well documented trading patterns, e.g., house money, break even, and disposition effects.


Brief introduction to the reporter: Prof. LI Duan received his Bachelor degree at Fudan University, his Master degree on automatic control at Shanghai Jiao Tong University (July. 2014) and PhD on systems engineering at Case Western Reserve University. He joined in department of Systems engineering and engineering management, Chinese University of Hong Kong(Nov. 1994) and worked  as department chairman there(2003-2012). Now he holds a post in department of System engineering and engineering management as Patrick Huen Wing Ming chairman professor.

      Prof. LI has a wide researching interests including optimization, optimum control, financial engineering and decision theory. He has already published over 200 papers on these fields. He was one of writers of the book《Nonlinear Integer Programming》(Springer, 2006). He has ever been an associate editor of IEEE transactions on Automatic Control and editorial board member of many international magazines including Journal of Global Optimization, IIET ransactions on Operations Engineering. He has ever worked as vice chairman in mathematical programming branch of operations research society of China.