Optimal Rebalancing Frequencies for Multidimensional Portfolios
Portfolio Management
2017-09-05 v4 Optimization and Control
Probability
Abstract
We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit formulas for these and the associated welfare losses due to small transaction costs in a general, multidimensional diffusion setting, and compare their performance to a number of alternatives using Monte Carlo simulations.
Keywords
Cite
@article{arxiv.1510.05097,
title = {Optimal Rebalancing Frequencies for Multidimensional Portfolios},
author = {Ibrahim Ekren and Ren Liu and Johannes Muhle-Karbe},
journal= {arXiv preprint arXiv:1510.05097},
year = {2017}
}
Comments
25 pages, 1 figure, to appear in "Mathematics and Financial Economics"