Related papers: Portfolio Selection with Small Transaction Costs a…
We study a goal-based portfolio selection problem in which an investor aims to meet multiple financial goals, each with a specific deadline and target amount. Trading the stock incurs a strictly positive transaction cost. Using the…
We study an optimal liquidation problem under the ambiguity with respect to price impact parameters. Our main results show that the value function and the optimal trading strategy can be characterized by the solution to a semi-linear PDE…
In this paper we study an optimal portfolio selection problem under instantaneous price impact. Based on some empirical analysis in the literature, we model such impact as a concave function of the trading size when the trading size is…
We consider an investor with constant absolute risk aversion who trades a risky asset with general Ito dynamics, in the presence of small proportional transaction costs. Kallsen and Muhle-Karbe (2012) formally derived the leading-order…
Individual investors are now massively using online brokers to trade stocks with convenient interfaces and low fees, albeit losing the advice and personalization traditionally provided by full-service brokers. We frame the problem faced by…
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
We study portfolio selection in a model with both temporary and transient price impact introduced by Garleanu and Pedersen (2016). In the large-liquidity limit where both frictions are small, we derive explicit formulas for the…
This paper studies the robust portfolio selection problem under a state-dependent confidence set. The investor invests in a financial market with a risk-free asset and a risky asset. The ambiguity-averse investor faces uncertainty over the…
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…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
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 consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…
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…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
Recent progress in portfolio choice has made a wide class of problems involving transaction costs tractable. We review the basic approach to these problems, and outline some directions for future research.
In this paper, optimal consumption and investment decisions are studied for an investor who can invest in a fixed interest rate bank account and a stock whose price is a log normal diffusion. We present the method of the HJB equation in…