Nasdaq Trading and Trading Costs: 1993-2002

Costs of Stock Trading by Study on Commitment Components

In this paper, we are examining the relationship between stock trading costs and commitment components and find both abnormal and normal commitments associated with these costs are associated. Moreover, stock trading costs have a greater influence by both abnormal and normal negative commitments more than positive commitments. Further analysis has shown that in general, investors are unable to ...

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...

Optimal Trading with Linear Costs

We consider the problem of the optimal trading strategy in the presence of linear costs, and with a strict cap on the allowed position in the market. Using Bellman’s backward recursion method, we show that the optimal strategy is to switch between the maximum allowed long position and the maximum allowed short position, whenever the predictor exceeds a threshold value, for which we establish an...

Trading Partners and Trading Volumes∗

Trading Regions Under Proportional Transaction Costs

In the Black-Scholes model optimal trading for maximizing expected power utility under proportional transaction costs can be described by three intervals B, NT , S: If the proportion of wealth invested in the stocks lies in B, NT , S, then buying, not trading and selling, respectively, are optimal. For a finite time horizon, the boundaries of these trading regions depend on time and on the term...