Financial Engineering Practitioners Seminar: Prof. Martin Haugh
Date: April 20, 2015 from 6:00 pm to 7:30 pm EDT
Location: Davis Auditorium, CEPSR Building
Contact: For further information regarding this event, please contact IEOR Department by sending email to info@ieor.columbia.edu .
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Title: Tax-Aware Dynamic Asset Allocation

Abstract: We consider dynamic asset allocation problems where the investor is required to pay capital gains taxes on her investment gains. This is a very challenging problem because the tax to be paid whenever a security is sold depends on the tax basis, i.e. the price(s) at which the security was originally purchased. This feature results in high-dimensional and path-dependent problems which cannot be solved exactly except in the case of very stylized problems with just one or two securities and relatively few time periods. We develop several sub-optimal trading policies for these problems and use duality techniques based on information relaxations to assess their performances. Our numerical experiments consider problems with as many as 20 securities and 20 time periods. The principal contribution of this paper is in demonstrating that much larger problems can now be tackled through the use of sophisticated optimization techniques and duality methods based on information-relaxations. 

(Joint work with Garud Iyengar and Chun Wang)

Bio: Martin Haugh originally joined the Industrial Engineering and Operations Research Department in January 2002 after completing his PhD in Operations Research at MIT. He was a faculty member in the IEOR department until June 2005 and during this time his teaching and research focused on financial engineering. Between 2005 and 2009 he worked as a quant in the hedge fund industry in New York and London. He then returned to academia and the IEOR department in July 2009.

His current research interests include financial engineering, risk management, machine learning and Markov decision processes.