Related papers: The dual optimizer for the growth-optimal portfoli…
We study optimal investment in a financial market having a finite number of assets from a signal processing perspective. We investigate how an investor should distribute capital over these assets and when he should reallocate the…
Shadow prices simplify the derivation of optimal trading strategies in markets with transaction costs by transferring optimization into a more tractable, frictionless market. This paper establishes that a na\"ive shadow price Ansatz for…
Shadow prices are well understood and are widely used in economic applications. However, there are limits to where shadow prices can be applied assuming their natural interpretation and the fact that they reflect the first order optimality…
For utility maximization problems under proportional transaction costs, it has been observed that the original market with transaction costs can sometimes be replaced by a frictionless "shadow market" that yields the same optimal strategy…
We consider a discrete-time, generically incomplete market model and a behavioural investor with power-like utility and distortion functions. The existence of optimal strategies in this setting has been shown in a previous paper under…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility…
In this paper, asymptotic results in a long-term growth rate portfolio optimization model under both fixed and proportional transaction costs are obtained. More precisely, the convergence of the model when the fixed costs tend to zero is…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
In this paper, we study a game with positive or plus infinite expectation and determine the optimal proportion of investment for maximizing the limit expectation of growth rate per attempt. With this objective, we introduce a new pricing…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
The aim of this work is to extend the capital growth theory developed by Kelly, Breiman, Cover and others to asset market models with transaction costs. We define a natural generalization of the notion of a numeraire portfolio proposed by…
We study the problem of optimal trading using general alpha predictors with linear costs and temporary impact. We do this within the framework of stochastic optimization with finite horizon using both limit and market orders. Consistently…
We consider portfolio optimization under a preference model in a single-period, complete market. This preference model includes Yaari's dual theory of choice and quantile maximization as special cases. We characterize when the optimal…
We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the maximum between proportional transaction costs and a…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
We study shortfall risk minimization for American options with path dependent payoffs under proportional transaction costs in the Black--Scholes (BS) model. We show that for this case the shortfall risk is a limit of similar terms in an…
A new mathematical model for the Black-Scholes equation is proposed to forecast option prices. This model includes new interval for the price of the underlying stock as well as new initial and boundary conditions. Conventional notions of…
In this note, we study the utility maximization problem on the terminal wealth under proportional transaction costs and bounded random endowment. In particular, we restrict ourselves to the num\'eraire-based model and work with utility…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…