A Primer On Portfolio Choice With Small Transaction Costs
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A Primer On Portfolio Choice With Small Transaction Costs
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Author : Johannes Muhle-Karbe
language : en
Publisher:
Release Date : 2018
A Primer On Portfolio Choice With Small Transaction Costs written by Johannes Muhle-Karbe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This review is an introduction to asymptotic methods for portfolio choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and how to simplify them in the small-cost limit. This allows one to obtain explicit solutions in a wide range of settings, which we illustrate for a model with mean-reverting expected returns and proportional transaction costs. For more complex models, we present a policy iteration scheme that allows one to numerically compute the solution.
Optimal Portfolio Selection For The Small Investor Considering Risk And Transaction Costs
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Author : Rainer Baule
language : en
Publisher:
Release Date : 2013
Optimal Portfolio Selection For The Small Investor Considering Risk And Transaction Costs written by Rainer Baule and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
A direct application of classical portfolio selection theory is problematic for the small investor, since transaction costs in the form of bank and broker fees exist. Particularly minimum fees force the investor to choose a rather small selection of assets. This leads to an optimization problem which juxtaposes the transaction costs against the risk costs arising with portfolios consisting of only a few assets. Despite the non-convex and thus complex optimization, an algorithmic solution turns out to be very fast and precise. An empirical study shows that for smaller investment volumes, transaction costs dominate risk costs, so that optimal portfolios contain only a very small number of assets.
The Impact Of Predictability And Transaction Costs On Portfolio Choice In A Multiperiod Setting
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Author : Anthony W. Lynch
language : en
Publisher:
Release Date : 1997
The Impact Of Predictability And Transaction Costs On Portfolio Choice In A Multiperiod Setting written by Anthony W. Lynch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Transaction costs categories.
Optimal Portfolio Choice Under Partial Information And Transaction Costs
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Author : Huamao Wang
language : en
Publisher:
Release Date : 2010
Optimal Portfolio Choice Under Partial Information And Transaction Costs written by Huamao Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
An Exact Solution To The Portfolio Choice Problem Under Transactions Costs
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Author : Bernard Dumas
language : en
Publisher:
Release Date : 1989
An Exact Solution To The Portfolio Choice Problem Under Transactions Costs written by Bernard Dumas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with categories.
Optimal Portfolio Selection With Fixed Transaction Costs In The Presence Of Jumps And Random Drift
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Author : Ajay Subramanian Aiyer
language : en
Publisher:
Release Date : 1996
Optimal Portfolio Selection With Fixed Transaction Costs In The Presence Of Jumps And Random Drift written by Ajay Subramanian Aiyer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Investments categories.
Optimal Portfolio Selection With Transaction Costs And Event Risk
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Author : Hong Liu
language : en
Publisher:
Release Date : 2009
Optimal Portfolio Selection With Transaction Costs And Event Risk written by Hong Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
Models with event risk (the possibility of sudden large price movements) have proven important for option pricing (e.g., Bates (1996))and optimal portfolio selection (e.g., Liu, Longstaff and Pan(2003)). However, most of the existing studies ignore transaction costs which are prevalent in almost all of the financial markets. How investors should trade in the presence of event risks and transaction costs remains an important but unanswered question. In this paper, we consider the optimal trading strategy for a CRRA investor who derives utility from terminal wealth and can continuously trade in a riskless asset and a risky asset. The risky asset, whose price follows a jump diffusion, is subject to proportional transaction costs. We show that the optimal trading strategy is to maintain the fraction of wealth invested in the risky asset between two bounds. In contrast to the case without jump risk, this fraction can jump outside the bounds which implies a discrete transaction back to the closest boundary and thus a greater transaction cost payment. We characterize the value function and provide bounds on the trading boundaries. Somewhat surprisingly, we find that an increase in transaction costs may increase trading frequency. Our numerical results suggest that event risk significantly reduces stock holdings and decreases trading frequency. We also show that the boundaries are affected not only by jump sizes but also by the uncertainty about jump sizes. Furthermore, we examine how the optimal transaction boundaries vary through time for investors with deterministic horizons.
Optimal Portfolio Selection With Transaction Costs
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Author : Phelim P. Boyle
language : en
Publisher:
Release Date : 1994
Optimal Portfolio Selection With Transaction Costs written by Phelim P. Boyle and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Investment analysis categories.
Optimal Portfolio Selection With Transaction Costs A Model With Non Constant Transaction Cost Rate
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Author : Andriy Demchuk
language : en
Publisher:
Release Date : 1999
Optimal Portfolio Selection With Transaction Costs A Model With Non Constant Transaction Cost Rate written by Andriy Demchuk and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
A Simple Algorithm For Optimal Portfolio Selection With Fixed Transaction Costs
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Author : Nitin Ratilal Patel
language : en
Publisher:
Release Date : 1979
A Simple Algorithm For Optimal Portfolio Selection With Fixed Transaction Costs written by Nitin Ratilal Patel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1979 with Portfolio management categories.