Related papers: The General Structure of Optimal Investment and Co…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
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…
Transaction costs appear in financial markets in more than one form. There are several results in the literature on small proportional transaction cost and not that many on fixed transaction cost. In the present work, we heuristically study…
We present stability conditions for deterministic time-varying nonlinear discrete-time systems whose inputs aim to minimize an infinite-horizon time-dependent cost. Global asymptotic and exponential stability properties for general…
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…
In this paper, we provide optimal solutions to two different (but related) input/output design problems involving large-scale linear dynamical systems, where the cost associated to each directly actuated/measured state variable can take…
As an example for the optimization of unstable flows, we present an economics-based method for deciding the optimal rates at which vehicles are allowed to enter a highway. It exploits the naturally occuring fluctuations of traffic flow and…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
We establish structural properties of optimal stopping problems under time-consistent dynamic (coherent) risk measures, focusing on value function monotonicity and the existence of control limit (threshold) optimal policies. While such…
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…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
We provide a detailed characterization of the optimal consumption stream for the additive habit-forming utility maximization problem, in a framework of general discrete-time incomplete markets and random endowments. This characterization…
We formalize the paradox of an omniscient yet lazy investor - a perfectly informed agent who trades infrequently due to execution or computational frictions. Starting from a deterministic geometric construction, we derive a closed-form…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
This article studies the problem of utility maximization in an incomplete market under a class of nonlinear expectations and general constraints on trading strategies. Using a $g$-martingale method, we provide an explicit solution to our…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
This paper studies a {\it reversible} investment problem where a social planner aims to control its capacity production in order to fit optimally the random demand of a good. Our model allows for general diffusion dynamics on the demand as…
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…