Related papers: Rebalancing with Linear and Quadratic Costs
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…
We study a linear-quadratic, optimal control problem on a discrete, finite time horizon with distributional ambiguity, in which the cost is assessed via Conditional Value-at-Risk (CVaR). We take steps toward deriving a scalable dynamic…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
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 effect of proportional transaction costs on systematically generated portfolios is studied empirically. The performance of several portfolios (the index tracking portfolio, the equally-weighted portfolio, the entropy-weighted portfolio,…
As insurers increasingly behave like financial intermediaries and actively participate in capital markets, understanding the dependence structure between insurance and financial risks becomes crucial for insurers' operations. This paper…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
This paper analyzes the hypothesis that returns play a risk-compensating role in the market for corporate revolving lines of credit. Specifically, we test whether borrower risk and the expected return on these debt instruments are…
This paper introduces a novel robust trading paradigm, called \textit{multi-double linear policies}, situated within a \textit{generalized} lattice market. Distinctively, our framework departs from most existing robust trading strategies,…
Previous studies into the budget constraint of portfolio optimization problems based on statistical mechanical informatics have not considered that the purchase cost per unit of each asset is distinct. Moreover, the fact that the optimal…
Imbalanced problems can arise in different real-world situations, and to address this, certain strategies in the form of resampling or balancing algorithms are proposed. This issue has largely been studied in the context of classification,…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We analyze multiline pricing and capital allocation in equilibrium no-arbitrage markets. Existing theories often assume a perfect complete market, but when pricing is linear, there is no diversification benefit from risk pooling and…
We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…
This paper describes multi-portfolio `internal' rebalancing processes used in the finance industry. Instead of trading with the market to `externally' rebalance, these internal processes detail how portfolio managers buy and sell between…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
The energy market, and specifically the renewable sector carries volatility and risks, similar to the financial market. Here, we leverage on a well-established, return-risk approach, commonly used by equity portfolio-managers and apply it…
Asymptotic stability in economic receding horizon control can be obtained under a strict dissipativity assumption, related to positive-definiteness of a so-called rotated cost, and through the use of suitable terminal cost and constraints.…