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Optimal Rebalancing Frequencies for Multidimensional Portfolios

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  • Ibrahim Ekren
  • Ren Liu
  • Johannes Muhle-Karbe

Abstract

We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit formulas for these and the associated welfare losses due to small transaction costs in a general, multidimensional diffusion setting, and compare their performance to a number of alternatives using Monte Carlo simulations.

Suggested Citation

  • Ibrahim Ekren & Ren Liu & Johannes Muhle-Karbe, 2015. "Optimal Rebalancing Frequencies for Multidimensional Portfolios," Papers 1510.05097, arXiv.org, revised Sep 2017.
    • Handle: RePEc:arx:papers:1510.05097
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    References listed on IDEAS

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