Multi-asset portfolio optimization with transaction cost
AbstractThe inclusion of transaction costs in the optimal portfolio selection and consumption rule problem is accomplished via the use of perturbation analyses. The portfolio under consideration consists of more than one risky asset, which makes numerical methods impractical. The objective is to establish both the transaction and the no-transaction regions that characterize the optimal investment strategy. The optimal transaction boundaries for two and three risky assets portfolios are solved explicitly. A procedure for solving the N risky assets portfolio is described. The formulation used also reduces the restriction on the functional form of the utility preference.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 11 (2004)
Issue (Month): 2 ()
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- Dylan Possama\"i & H. Mete Soner & Nizar Touzi, 2012. "Homogenization and asymptotics for small transaction costs: the multidimensional case," Papers 1212.6275, arXiv.org, revised Jan 2013.
- H. Mete Soner & Nizar Touzi, 2012. "Homogenization and asymptotics for small transaction costs," Papers 1202.6131, arXiv.org, revised Dec 2012.
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