Related papers: Numerical Solution of Dynamic Portfolio Optimizati…
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.
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric…
Proportional transaction costs present difficult theoretical problems in trading algorithm design, on account of their lack of analytical tractability. The author derives a solution of DT-NT-DT form for an arbitrary model in which the the…
We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We suggest to use path-wise growth optimality as the decision criterion and encode preferences through restrictions on the class…
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when…
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,…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
We consider a general formulation of the Principal-Agent problem with a lump-sum payment on a finite horizon, providing a systematic method for solving such problems. Our approach is the following: we first find the contract that is optimal…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We propose a novel direct transcription and solution method for solving nonlinear, continuous-time dynamic optimization problems. Instead of forcing the dynamic constraints to be satisfied only at a selected number of points as in direct…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
The aim of this paper is to investigate the impact of rebalancing frequency and transaction costs on the log-optimal portfolio, which is a portfolio that maximizes the expected logarithmic growth rate of an investor's wealth. We prove that…
This paper considers the problem of designing a dynamical system to solve constrained optimization problems in a distributed way and in an anytime fashion (i.e., such that the feasible set is forward invariant). For problems with separable…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
We consider a broad class of dynamic programming (DP) problems that involve a partially linear structure and some positivity properties in their system equation and cost function. We address deterministic and stochastic problems, possibly…
In this paper we show how to implement in a simple way some complex real-life constraints on the portfolio optimization problem, so that it becomes amenable to quantum optimization algorithms. Specifically, first we explain how to obtain…
Motivated by the asset-liability management of a nuclear power plant operator, we consider the problem of finding the least expensive portfolio, which outperforms a given set of stochastic benchmarks. For a specified loss function, the…