Growth-optimal portfolios under transaction costs

Jan Palczewski, and Łukasz Stettner. "Growth-optimal portfolios under transaction costs." Applicationes Mathematicae 35.1 (2008): 1-31. <http://eudml.org/doc/280018>.

@article{JanPalczewski2008,
abstract = {This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depends on an external process of economic factors. There are transaction costs with a structure that covers, in particular, the case of fixed plus proportional costs. We prove that there exists a self-financing trading strategy maximizing the average growth rate of the portfolio wealth. We show that this strategy has a Markovian form. Our result is obtained by large deviations estimates on empirical measures of the price process and by a generalization of the vanishing discount method to discontinuous transition operators.},
author = {Jan Palczewski, Łukasz Stettner},
journal = {Applicationes Mathematicae},
keywords = {portfolio optimization; transaction costs; growth rate; logarithmic utility; impulsive strategy},
language = {eng},
number = {1},
pages = {1-31},
title = {Growth-optimal portfolios under transaction costs},
url = {http://eudml.org/doc/280018},
volume = {35},
year = {2008},
}

TY - JOUR
AU - Jan Palczewski
AU - Łukasz Stettner
TI - Growth-optimal portfolios under transaction costs
JO - Applicationes Mathematicae
PY - 2008
VL - 35
IS - 1
SP - 1
EP - 31
AB - This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depends on an external process of economic factors. There are transaction costs with a structure that covers, in particular, the case of fixed plus proportional costs. We prove that there exists a self-financing trading strategy maximizing the average growth rate of the portfolio wealth. We show that this strategy has a Markovian form. Our result is obtained by large deviations estimates on empirical measures of the price process and by a generalization of the vanishing discount method to discontinuous transition operators.
LA - eng
KW - portfolio optimization; transaction costs; growth rate; logarithmic utility; impulsive strategy
UR - http://eudml.org/doc/280018
ER -