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A geometric approach to portfolio optimization in models with transaction costs

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Abstract

We consider a continuous-time stochastic optimization problem with infinite horizon, linear dynamics, and cone constraints which includes as a particular case portfolio selection problems under transaction costs for models of stock and currency markets. Using an appropriate geometric formalism we show that the Bellman function is the unique viscosity solution of a HJB equation. Copyright Springer-Verlag Berlin/Heidelberg 2004

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  • Yuri Kabanov & Claudia Klüppelberg, 2004. "A geometric approach to portfolio optimization in models with transaction costs," Finance and Stochastics, Springer, vol. 8(2), pages 207-227, May.
    • Handle: RePEc:spr:finsto:v:8:y:2004:i:2:p:207-227
    DOI: 10.1007/s00780-003-0114-3
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    Citations

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    Cited by:

    1. Thomas Breuer & Martin Jandačka, 2008. "Portfolio selection with transaction costs under expected shortfall constraints," Computational Management Science, Springer, vol. 5(4), pages 305-316, October.
    2. Bruno Bouchard & Elyès Jouini, 2010. "Transaction Costs in Financial Models," Post-Print halshs-00703138, HAL.
    3. Minglian Lin & Indranil SenGupta, 2023. "Analysis of optimal portfolio on finite and small-time horizons for a stochastic volatility model with multiple correlated assets," Papers 2302.06778, arXiv.org, revised Dec 2023.
    4. Dimitri Vallière & Yuri Kabanov & Emmanuel Lépinette, 2016. "Consumption-investment problem with transaction costs for Lévy-driven price processes," Finance and Stochastics, Springer, vol. 20(3), pages 705-740, July.
    5. Erhan Bayraktar & Yuchong Zhang, 2014. "Stochastic Perron's Method for the Probability of lifetime ruin problem under transaction costs," Papers 1404.7406, arXiv.org, revised Nov 2014.
    6. Christoph Belak & Jörn Sass, 2019. "Finite-horizon optimal investment with transaction costs: construction of the optimal strategies," Finance and Stochastics, Springer, vol. 23(4), pages 861-888, October.
    7. Soren Christensen & Marc Wittlinger, 2012. "Optimal relaxed portfolio strategies for growth rate maximization problems with transaction costs," Papers 1209.0305, arXiv.org, revised Jun 2013.
    8. Lin He & Zongxia Liang & Sheng Wang, 2022. "Modern Tontine with Transaction Costs," Papers 2209.09709, arXiv.org, revised Jun 2023.

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