Related papers: Optimal multifactor trading under proportional tra…
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…
This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe…
Funds at large portfolio management firms may consist of many portfolio managers (PMs), each managing a portion of the fund and optimizing a distinct objective. Although the PMs determine their trades independently, the trade lists may be…
The Merton investment-consumption problem is fundamental, both in the field of finance, and in stochastic control. An important extension of the problem adds transaction costs, which is highly relevant from a financial perspective but also…
High-frequency trading (HFT) represents a pivotal and intensely competitive domain within the financial markets. The velocity and accuracy of data processing exert a direct influence on profitability, underscoring the significance of this…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
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…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
Convex duality for two two different super--replication problems in a continuous time financial market with proportional transaction cost is proved. In this market, static hedging in a finite number of options, in addition to usual dynamic…
In this paper, we investigate a portfolio selection problem with transaction costs under a two-factor stochastic volatility structure, where volatility follows a mean-reverting process with a stochastic mean-reversion level. The model…
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…
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
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…
We consider the problem of the optimal trading strategy in the presence of a price predictor, linear trading costs and a quadratic risk control. The solution is known to be a band system, a policy that induces a no-trading zone in the…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We study the problem of the optimal execution of a large trade in the presence of nonlinear transient impact. We propose an approach based on homotopy analysis, whereby a well behaved initial strategy is continuously deformed to lower the…
We revisit the optimal investment and consumption problem with proportional transaction costs. We prove that both the value function and the slopes of the lines demarcating the no-trading region are analytic functions of cube root of the…