A Primer on Portfolio Choice with Small Transaction Costs

Autor:	Muhle-Karbe, Johannes, Reppen, Max, Soner, H. Mete
Rok vydání:	2016
Předmět:	Quantitative Finance - Portfolio Management Mathematics - Optimization and Control
Druh dokumentu:	Working Paper
Popis:	This survey is an introduction to asymptotic methods for portfolio-choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and simplify them in the small-cost limit. This allows to obtain explicit solutions in a wide range of settings, which we illustrate for a model with mean-reverting expected returns and proportional transaction costs. For even more complex models, we present a policy iteration scheme that allows to compute the solution numerically. Comment: 30 pages, 5 figures
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/1612.01302 Zobrazit plný text záznamu View this record from Arxiv