Related papers: Growth-optimal portfolios under transaction costs
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
In this article we study a multi-asset version of the Merton investment and consumption problem with proportional transaction costs. In general it is difficult to make analytical progress towards a solution in such problems, but we…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
In the classical static optimal reinsurance problem, the cost of capital for the insurer's risk exposure determined by a monetary risk measure is minimized over the class of reinsurance treaties represented by increasing Lipschitz retained…
We study the explicit calculation of the set of superhedging portfolios of contingent claims in a discrete-time market model for d assets with proportional transaction costs. The set of superhedging portfolios can be obtained by a recursive…
Assuming frictionless trading, classical stochastic portfolio theory (SPT) provides relative arbitrage strategies. However, the costs associated with real-world execution are state-dependent, volatile, and under increasing stress during…
We consider a financial market model driven by an R^n-valued Gaussian process with stationary increments which is different from Brownian motion. This driving noise process consists of $n$ independent components, and each component has…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
In frictionless markets, utility maximization problems are typically solved either by stochastic control or by martingale methods. Beginning with the seminal paper of Davis and Norman [Math. Oper. Res. 15 (1990) 676--713], stochastic…
This paper studies a continuous-time optimal portfolio selection problem in the complete market for a behavioral investor whose preference is of the prospect type with probability distortion. The investor concerns about the terminal…
We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
We study optimal investment problems under the framework of cumulative prospect theory (CPT). A CPT investor makes investment decisions in a single-period financial market with transaction costs. The objective is to seek the optimal…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
Transaction costs play a critical role in asset allocation and consumption strategies in portfolio management. We apply the methods of dynamic programming and singular perturbation expansion to derive the closed-form leading solutions to…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…