Rebalancing with Linear and Quadratic Costs
Portfolio Management
2017-09-05 v3 Optimization and Control
Probability
Trading and Market Microstructure
Abstract
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 representative investors with constant relative risk aversion and a long horizon.
Keywords
Cite
@article{arxiv.1402.5306,
title = {Rebalancing with Linear and Quadratic Costs},
author = {Ren Liu and Johannes Muhle-Karbe and Marko H. Weber},
journal= {arXiv preprint arXiv:1402.5306},
year = {2017}
}
Comments
30 pages, 3 figures, to appear in "SIAM Journal on Control and Optimization"