Related papers: A Primer on Portfolio Choice with Small Transactio…
We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non…
In this article we present a new approach to the numerical valuation of derivative securities. The method is based on our previous work where we formulated the theory of pricing in terms of tradables. The basic idea is to fit a finite…
Stochastic algorithms are among the best for solving computationally hard search and reasoning problems. The runtime of such procedures is characterized by a random variable. Different algorithms give rise to different probability…
We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…
We compute the integral of a function or the expectation of a random variable with minimal cost and use, for our new algorithm and for upper bounds of the complexity, i.i.d. samples. Under certain assumptions it is possible to select a…
We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary…
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…
We consider the stochastic control problem of a financial trader that needs to unwind a large asset portfolio within a short period of time. The trader can simultaneously submit active orders to a primary market and passive orders to a dark…
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…
In this paper, we revisit the portfolio allocation problem with designated risk-budget [Qian, 2005]. We generalize the problem of arbitrary risk budgets with unequal correlations to one that includes return forecasts and transaction costs…
In this paper a general class of tree algorithms is analyzed. It is shown that, by using an appropriate probabilistic representation of the quantities of interest, the asymptotic behavior of these algorithms can be obtained quite easily…
An algorithm was recently introduced by INTECH for the purposes of estimating the trading-profit contribution of systematic rebalancing to the relative return of rules-based investment strategies. We apply this methodology to analyze the…
The paper [12] examines a concept of equilibrium policies instead of optimal controls in stochastic optimization to analyze a mean-variance portfolio selection problem. We follow the same approach in order to investigate the Merton…
Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's…
This paper studies the dynamic programming principle using the measurable selection method for stochastic control of continuous processes. The novelty of this work is to incorporate intermediate expectation constraints on the canonical…
We provide a unifying treatment of pathwise moderate deviations for models commonly used in financial applications, and for related integrated functionals. Suitable scaling allows us to transfer these results into small-time, large-time and…
Stochastic choice-based discrete planning is a broad class of decision-making problems characterized by a sequential decision-making process involving a planner and a group of customers. The firm or planner first decides a subset of options…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…