Related papers: Portfolio Selection with Small Transaction Costs a…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
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…
In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This work discusses the benefits of constrained portfolio turnover strategies for small to medium-sized portfolios. We propose a dynamic multi-period model that aims to minimize transaction costs and maximize terminal wealth levels whilst…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
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 deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
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 consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…
In the present paper, the minimal investment risk for a portfolio optimization problem with imposed budget and investment concentration constraints is considered using replica analysis. Since the minimal investment risk is influenced by the…
Previous literature shows that prevalent risk measures such as Value at Risk or Expected Shortfall are ineffective to curb excessive risk-taking by a tail-risk-seeking trader with S-shaped utility function in the context of portfolio…
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…