IEOR Seminar Series: Jaksa Cvitanic, California Institute of Technology
IEOR seminars occur on Mondays throughout the fall semester in room 3108 of Etcheverry Hall. Seminars feature leading-edge research from experts in industrial engineering and operations research who come from local, national, and international institutions. Seminars are open to students, faculty, and the public.
Title: Optimal Fund Menus
Abstract: (Joint with Julien Hugonnier) We study the optimal design of a menu of funds by a manager who is required to use linear pricing and does not observe the beliefs of investors regarding one of the risky assets. The optimal menu involves bundling of assets and can be explicitly constructed from the solution to a calculus of variations problem that optimizes over the indirect utility that each type of investor receives. We provide a complete characterization of the optimal menu and show that the need to maintain incentive compatibility leads the manager to offer funds that are inefficiently tilted towards the asset that is not subject to the information friction.
Bio: Jaksa Cvitanic works in the fields of mathematical finance, financial engineering, and financial economics. He received a PhD in Statistics from Columbia University in 1992. He was an Assistant and Associate Professor of Statistics at Columbia University until 1999. From 1999 to 2005 he was a Professor of Mathematics and Economics at the University of Southern California. He is currently Richard N. Merkin Professor of Mathematical Finance at the California Institute of Technology and the president of the Bachelier Finance Society. He has been or was a co-editor of “Finance and Stochastics” and “Mathematical Finance”, and has served on the editorial boards of several other journals. He has co-authored two books, “Introduction to the Economics and Mathematics of Financial Markets” and “Contract Theory in Continuous Time Models”, and numerous scientific articles.