Related papers: A Primer on Portfolio Choice with Small Transactio…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
We introduce the class of multistage stochastic optimization problems with a random number of stages. For such problems, we show how to write dynamic programming equations and detail the Stochastic Dual Dynamic Programming algorithm to…
We consider a constrained version of the shortest path problem on the complete graphs whose edges have independent random lengths and costs. We establish the asymptotic value of the minimum length as a function of the cost-budget within a…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
In this paper I develop a new computational method for pricing path dependent options. Using the path integral representation of the option price, I show that in general it is possible to perform analytically a partial averaging over the…
We consider the problem of expected cost analysis over nondeterministic probabilistic programs, which aims at automated methods for analyzing the resource-usage of such programs. Previous approaches for this problem could only handle…
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…
A standard informal method for analyzing the asymptotic complexity of a program is to extract a recurrence that describes its cost in terms of the size of its input, and then to compute a closed-form upper bound on that recurrence. We give…
Online portfolio selection is a fundamental problem in computational finance, which has been extensively studied across several research communities, including finance, statistics, artificial intelligence, machine learning, and data mining,…
We consider a general problem of finding a strategy that minimizes the exponential moment of a given cost function, with an emphasis on its relation to the more common criterion of minimization the expectation of the first moment of the…
We study the utility indifference price of a European option in the context of small transaction costs. Considering the general setup allowing consumption and a general utility function at final time T, we obtain an asymptotic expansion of…
A central push in operations models over the last decade has been the incorporation of models of customer choice. Real world implementations of many of these models face the formidable stumbling block of simply identifying the `right' model…
We consider an agent who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of a proportional transaction cost. The utility function considered is…
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 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…
We employ perturbation analysis technique to study multi-asset portfolio optimisation with transaction cost. We allow for correlations in risky assets and obtain optimal trading methods for general utility functions. Our analytical results…
In this paper, we first conduct a study of the portfolio selection problem, incorporating both exogenous (proportional) and endogenous (resulting from liquidity risk, characterized by a stochastic process) transaction costs through the…
In the context of the multi-dimensional infinite horizon optimal consumption-investment problem with proportional transaction costs, we provide the first order expansion in small transact costs. Similar to the one-dimensional derivation in…
Optimal portfolio selection problems are determined by the (unknown) parameters of the data generating process. If an investor wants to realise the position suggested by the optimal portfolios, he/she needs to estimate the unknown…
In order to estimate the conditional risk of a portfolio's return, two strategies can be advocated. A multivariate strategy requires estimating a dynamic model for the vector of risk factors, which is often challenging, when at all…