Density dependent utilities with transaction costs

Dynamic portfolio optimization with transaction costs and state-dependent drift

The problem of dynamic portfolio choice with transaction costs is often addressed by constructing a Markov Chain approximationof the continuous timeprice processes. Using this approximation,wepresent an efficient numerical method to determine optimal portfolio strategies under timeand state-dependent drift and proportional transaction costs. This scenario arises when investors have behavioral b...

Futures trading with transaction costs

A model for optimal consumption and investment is posed whose solution is provided by the classical Merton analysis when there is zero transaction cost. A probabilistic argument is developed to identify the loss in value when a proportional transaction cost is introduced. There are two sources of this loss. The first is a loss due to “displacement” that arises because one cannot maintain the op...

Convex Duality with Transaction Costs

Copyright: © 2016 INFORMS Abstract. Convex duality for two different super-replication problems in a continuous time financial market with proportional transaction cost is proved. In this market, static hedging in a finite number of options, in addition to usual dynamic hedging with the underlying stock, are allowed. The first one of the problems considered is the modelindependent hedging that ...

Option Hedging with Transaction Costs

Bilateral contracts with transaction costs

The paper studies bilateral contracting with endogenous property rights. Players engage in costly ex post adjustment of ex ante contract. After ex ante agreement on surplus sharing, players invest irreversibly production. Player costs of altering ex ante contract are transaction costs of three kinds: measurement, information and enforcement costs. Each player chooses an action which incurs tran...