Conference on Stochastic Control with Partial Observations and Financial Models of Incomplete Markets

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DMS-9813557Conference on Stochastic Control with Partial Observations andFinancial Models of Incomplete MarketsOrganizers: Kurt Helmes, Richard H. Stockbridge University of KentuckyAbstractIn recent years the importance of stochastic analysis and stochasticcontrol theory in financial applications has become apparent. The bestknown example is the Black-Scholes option pricing formula which hasspawned a $15 trillion industry in options trading. The significanceof this connection is demonstrated by the work of the 1997 recipientsof the Nobel Prize in Economics, Professors Robert Merton and MyronScholes. One of the crucial assumptions which underlies the theory ofBlack, Merton, and Scholes is that full information is available aboutthe markets. Markets for which this is true are known as completemarkets. Current research concentrates on incomplete markets.Incompleteness of the markets corresponds to partial observations instochastic control theory. Recent advances in the theory and numericalapproaches for these type of problems make it desirable to bringtogether leading specialists from academia and research groups offinancial institutions. This is even more imperative since very oftenin the past efforts within academia have been expended on findinghighly technical answers to the wrong questions. This conference willinclude practitioners who are well-acquainted with the sophisticatedmathematics used in mathematical finance to present to the academiciansthe real issues and problems of interest to the financial industry.