An Exact Solution To The Portfolio Choice Problem Under Transactions Costs
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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.
Portfolio Choice Problems
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Author : Nicolas Chapados
language : en
Publisher: Springer Science & Business Media
Release Date : 2011-07-12
Portfolio Choice Problems written by Nicolas Chapados and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-07-12 with Computers categories.
This brief offers a broad, yet concise, coverage of portfolio choice, containing both application-oriented and academic results, along with abundant pointers to the literature for further study. It cuts through many strands of the subject, presenting not only the classical results from financial economics but also approaches originating from information theory, machine learning and operations research. This compact treatment of the topic will be valuable to students entering the field, as well as practitioners looking for a broad coverage of the topic.
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.
Optimal Trading Strategies Of A Fund Manager With Transactions Costs
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Author : Qi Shen
language : en
Publisher:
Release Date : 1993
Optimal Trading Strategies Of A Fund Manager With Transactions Costs written by Qi Shen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Portfolio management 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.
We develop and analyze a model of optimal portfolio choice with a finite time horizon T. The investor's objective is to maximize the expected utility of termi- nal wealth based on partial information generated by stock prices. Rebalancing the portfolio composed of a stock and a bank account incurs transaction costs. This thesis extends the literature by examining the joint impact of partial in- formation and transaction costs on investors' decisions and expected utilities. After estimating the uncertain drift from historical prices, an investor up- dates the estimate over [0, T] based on partial information. This investor learns about the drift with the Kalman-Bucy filter, which provides a statistically op- timal estimate. Three regions of the state space with two free boundaries char- acterize the optimal portfolio strategy. A numerical algorithm using dynamic programming and a Markov chain approximation solves the model. The ex- isting algorithm with known parameters is time consuming and liable to cause underflow or overflow of the range of values represented. We propose four im- provements to overcome the drawbacks. The algorithm with modifications can be applied to the model under partial information according to the separation principle. We define two measures to quantify the losses in utility caused by partial information and transaction costs. Four quantities are introduced to describe investors' trading behaviours. With simulations of stock prices and the drift, the comparative analysis of five market parameters reveals the properties of the model and tests the robustness of the algorithm. Compared with the investors who use erroneous estimates of the drift, the learning investor's portfolio hold- ings are close to the informed investor's portfolio holdings. The average cost per transaction to the learning investor is the lowest. This investor has these benefits because the filter reduces uncertainty. We discuss the implications for practitioners to highlight the practical contributions of this research. KEY WORDS: investment; portfolio choice; parameter uncertainty; transaction costs; dynamic programming.
Paris Princeton Lectures On Mathematical Finance 2013
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Author : Fred Espen Benth
language : en
Publisher: Springer
Release Date : 2013-07-11
Paris Princeton Lectures On Mathematical Finance 2013 written by Fred Espen Benth and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-07-11 with Mathematics categories.
The current volume presents four chapters touching on some of the most important and modern areas of research in Mathematical Finance: asset price bubbles (by Philip Protter); energy markets (by Fred Espen Benth); investment under transaction costs (by Paolo Guasoni and Johannes Muhle-Karbe); and numerical methods for solving stochastic equations (by Dan Crisan, K. Manolarakis and C. Nee).The Paris-Princeton Lecture Notes on Mathematical Finance, of which this is the fifth volume, publish cutting-edge research in self-contained, expository articles from renowned specialists. The aim is to produce a series of articles that can serve as an introductory reference source for research in the field.
Portfolio Selection And Asset Pricing
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Author : Shouyang Wang
language : en
Publisher: Springer Science & Business Media
Release Date : 2012-12-06
Portfolio Selection And Asset Pricing written by Shouyang Wang and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-12-06 with Business & Economics categories.
In our daily life, almost every family owns a portfolio of assets. This portfolio could contain real assets such as a car, or a house, as well as financial assets such as stocks, bonds or futures. Portfolio theory deals with how to form a satisfied portfolio among an enormous number of assets. Originally proposed by H. Markowtiz in 1952, the mean-variance methodology for portfolio optimization has been central to the research activities in this area and has served as a basis for the development of modem financial theory during the past four decades. Follow-on work with this approach has born much fruit for this field of study. Among all those research fruits, the most important is the capital asset pricing model (CAPM) proposed by Sharpe in 1964. This model greatly simplifies the input for portfolio selection and makes the mean-variance methodology into a practical application. Consequently, lots of models were proposed to price the capital assets. In this book, some of the most important progresses in portfolio theory are surveyed and a few new models for portfolio selection are presented. Models for asset pricing are illustrated and the empirical tests of CAPM for China's stock markets are made. The first chapter surveys ideas and principles of modeling the investment decision process of economic agents. It starts with the Markowitz criteria of formulating return and risk as mean and variance and then looks into other related criteria which are based on probability assumptions on future prices of securities.
Portfolio Theory And Management
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Author : H. Kent Baker
language : en
Publisher: Oxford University Press, USA
Release Date : 2013-03-07
Portfolio Theory And Management written by H. Kent Baker and has been published by Oxford University Press, USA this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-03-07 with Business & Economics categories.
Portfolio Theory and Management examines the foundations of portfolio management with the contributions of financial pioneers up to the latest trends. The book discusses portfolio theory and management both before and after the 2007-2008 financial crisis. It takes a global focus by highlighting cross-country differences and practices.
Modeling And Numerical Solution Of Portfolio Optimization Problems With Transaction Costs An Option Pricing Approach
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Author : Zhen Liu
language : en
Publisher:
Release Date : 2007
Modeling And Numerical Solution Of Portfolio Optimization Problems With Transaction Costs An Option Pricing Approach written by Zhen Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Asset allocation categories.
Portfolio optimization problems with transaction costs have been widely studied by both financial economists and financial engineers through various approaches. In this paper, we propose the following approach. In analogy to American option pricing, we study the problem through the Finite Element Method (FEM) combined with an optimization method: We set up a buy-and-hold problem and then we find an optimal set of trades to move to an optimal portfolio whenever the current portfolio is far from the ideal. Local Discontinuous Galerkin (LDG) FEM is used to solve the partial differential equation (PDE) associated with the buy-and-hold problem. Coupled with the Runge-Kutta method for time discretization, this method is local with respect to spatial variable, can be used to achieve any order of accuracy and is explicit in the semi-discrete Ordinary Differential Equation (ODE) form. Also it is amendable to parallel computing. In this paper we give error bounds for the LDG method, with which we establish overall bounds for the portfolio optimization problem and prove the convergence of this method.