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Asymptotics for Fixed Transaction Costs

Author

Listed:
  • Albert Altarovici

    (ETH Zurich)

  • Johannes Muhle-Karbe

    (Imperial College London - Department of Mathematics)

  • Halil Mete Soner

    (ETH Zürich; Swiss Finance Institute)

Abstract

An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the leading-order corrections to the frictionless value function and optimal policy.

Suggested Citation

  • Albert Altarovici & Johannes Muhle-Karbe & Halil Mete Soner, 2013. "Asymptotics for Fixed Transaction Costs," Swiss Finance Institute Research Paper Series 13-35, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1335
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    Citations

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    Cited by:

    1. Bruno Bouchard & Ludovic Moreau & Mete H. Soner, 2016. "Hedging under an expected loss constraint with small transaction costs," Post-Print hal-00863562, HAL.
    2. Ludovic Moreau & Johannes Muhle-Karbe & H. Mete Soner, 2014. "Trading with Small Price Impact," Papers 1402.5304, arXiv.org, revised Mar 2015.
    3. Ren Liu & Johannes Muhle-Karbe & Marko H. Weber, 2014. "Rebalancing with Linear and Quadratic Costs," Papers 1402.5306, arXiv.org, revised Sep 2017.
    4. Jiatu Cai & Mathieu Rosenbaum & Peter Tankov, 2015. "Asymptotic Lower Bounds for Optimal Tracking: a Linear Programming Approach," Papers 1510.04295, arXiv.org.

    More about this item

    Keywords

    fixed transaction costs; optimal investment and consumption; homogenization; viscosity solutions; asymptotic expansions;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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