Optimal control of execution costs for portfolios
نویسندگان
چکیده
منابع مشابه
Optimal control of execution costs for portfolios
We derive dynamic optimal trading strategies that minimize the expected cost of trading blocks of securities over a xed time horizon. Given xed blocks si of shares of stock i to be traded within a nite number of periods T , i = 1; : : : ; n, and given price-impact functions that yield the execution price of an individual trade as a function of the shares of stock i traded and current market con...
متن کاملOptimal control of execution costs
We derive dynamic optimal trading strategies that minimize the expected cost of trading a large block of equity over a fixed time horizon. Specifically, given a fixed block SM of shares to be executed within a fixed finite number of periods 1, and given a price-impact function that yields the execution price of an individual trade as a function of the shares traded and market conditions, we obt...
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Rebalancing of portfolios with a concave utility function is considered. It is proved that transaction costs imply that there is a no-trade region where it is optimal not to trade. For proportional transaction costs it is optimal to rebalance to the boundary when outside the no-trade region. With flat transaction costs, the rebalance from outside the no-trade region should be to an internal sta...
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The vast majority of research related to optimal asset allocation strategies in the presence of transaction costs, requires formulation of highly sophisticated numerical schemes for the estimation of no-transaction bands; moreover, the optimization objectives examined are far less compared to the number of works that assume frictionless trading. In this article, we point out that an investor ma...
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We present an expected utility maximisation framework for optimally controlling a portfolio of options. By combining the replication approach to option pricing with ideas of the martingale approach to (stock) portfolio optimisation we arrive at an explicit solution of the option portfolio problem. Its characteristics are illustrated by some speciic examples. As an application, we calculate an o...
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ژورنال
عنوان ژورنال: Computing in Science & Engineering
سال: 1999
ISSN: 1521-9615
DOI: 10.1109/5992.805135