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Dynamic Portfolio Selection With Transaction Costs Microform A Non Singular Stochastic Optimal Control Approach
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Author :Thamayanthi Chellathurai Publisher :National Library of Canada = Bibliothèque nationale du Canada ISBN 13 :9780612829787 Total Pages :390 pages Book Rating :4.8/5 (297 download)
Book Synopsis Dynamic Portfolio Selection with Transaction Costs [microform] : a Non-singular Stochastic Optimal Control Approach by : Thamayanthi Chellathurai
Download or read book Dynamic Portfolio Selection with Transaction Costs [microform] : a Non-singular Stochastic Optimal Control Approach written by Thamayanthi Chellathurai and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 2003 with total page 390 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Portfolios written by Ralf Korn and published by World Scientific. This book was released on 1997 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: The focus of the book is the construction of optimal investment strategies in a security market model where the prices follow diffusion processes. It begins by presenting the complete Black-Scholes type model and then moves on to incomplete models and models including constraints and transaction costs. The models and methods presented will include the stochastic control method of Merton, the martingale method of Cox-Huang and Karatzas et al., the log optimal method of Cover and Jamshidian, the value-preserving model of Hellwig etc.
Book Synopsis Penalty Methods for Continuous-Time Portfolio Selection with Proportional Transaction Costs by : Min Dai
Download or read book Penalty Methods for Continuous-Time Portfolio Selection with Proportional Transaction Costs written by Min Dai and published by . This book was released on 2008 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We are concerned with numerical solutions for the continuous-time portfolio selection with proportional transaction costs which is described as a singular stochastic control problem. The associated value function is governed by a variational inequality with gradient constraints. We propose a penalty method to deal with the gradient constraints and employ the finite difference discretization. Convergence analysis is presented. We also show that the standard penalty method can be applied in the case of single risky asset where the problem can be reduced to a standard variational inequality. Numerical results are given to demonstrate the efficiency of the methods and to examine the behaviors of the optimal trading strategy.
Book Synopsis Optimal Portfolio Selection with Transaction Costs by : N'Golo Koné
Download or read book Optimal Portfolio Selection with Transaction Costs written by N'Golo Koné and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The optimal portfolio selection problem has been and continues to be a subject of interest in finance. The main objective is to find the best way to allocate the financial resources in a set of assets available on the financial market in order to reduce the portfolio fluctuation risks and achieve high returns. Nonetheless, there has been a strong advance in the literature of the optimal allocation of financial resources since the 20th century with the proposal of several strategies for portfolio selection essentially motivated by the pioneering work of Markowitz (1952)which provides a solid basis for portfolio analysis on the financial market. This thesis, divided into three chapters, contributes to this vast literature by proposing various economic tools to improve the process of selecting portfolios on the financial market in order to help stakeholders in this market. The first chapter, a joint paper with Marine Carrasco, addresses a portfolio selection problem with trading costs on stock market. More precisely, we develop a simple GMM-based test procedure to test the significance of trading costs effect in the economy regardless of the form of the transaction cost. In fact, most of the studies in the literature about trading costs effect depend largely on the form of the frictions assumed in the model (Dumas and Luciano (1991), Lynch and Balduzzi (1999), Lynch and Balduzzi (2000), Liu and Loewenstein (2002), Liu (2004), Lesmond et al. (2004), Buss et al. (2011), Gârleanu and Pedersen (2013), Heaton and Lucas (1996)). To overcome this problem, we develop a simple test procedure which allows us to test the significance of trading costs effect on a given asset in the economy without any assumption about the form of these frictions. Our test procedure relies on the assumption that the model estimated by GMM is correctly specified. A common test used to evaluate this assumption is the standard J-test proposed by Hansen (1982). However, when the true parameter is close to the boundary of the parameter space, the standard J-test based on the chi2 critical value suffers from overrejection. To overcome this problem, we propose a two-step procedure to test overidentifying restrictions when the parameter of interest approaches the boundary of the parameter space. In an empirical analysis, we apply our test procedures to the class of anomalies used in Novy-Marx and Velikov (2016). We show that transaction costs have a significant effect on investors' behavior for most anomalies. In that case, investors significantly improve out-of-sample performance by accounting for trading costs. The second chapter addresses a multi-period portfolio selection problem when the number of assets in the financial market is large. Using an exponential utility function, the optimal solution is shown to be a function of the inverse of the covariance matrix of asset returns. Nonetheless, when the number of assets grows, this inverse becomes unreliable, yielding a selected portfolio that is far from the optimal one. We propose two solutions to this problem. First, we penalize the norm of the portfolio weights in the dynamic problem and show that the selected strategy is asymptotically efficient. However, this method partially controls the estimation error in the optimal solution because it ignores the estimation error in the expected return, which may also be important when the number of assets in the financial market increases considerably. We propose an alternative method that consists of penalizing the norm of the difference of successive portfolio weights in the dynamic problem to guarantee that the optimal portfolio composition does not fluctuate widely between periods. We show, under appropriate regularity conditions, that we better control the estimation error in the optimal portfolio with this new procedure. This second method helps investors to avoid high trading costs in the financial market by selecting stable strategies over time. Extensive simulations and empirical results confirm that our procedures considerably improve the performance of the dynamic portfolio. In the third chapter, we use various regularization (or stabilization) techniques borrowed from the literature on inverse problems to estimate the maximum diversification as defined by Choueifaty (2011). In fact, the maximum diversification portfolio depends on the vector of asset volatilities and the inverse of the covariance matrix of assets distribution. In practice, these two quantities need to be replaced by their sample counterparts. This results in estimation error which is amplified by the fact that the sample covariance matrix may be close to a singular matrix in a large financial market, yielding a selected portfolio far from the optimal one with very poor performance. To address this problem, we investigate three regularization techniques, such as the ridge, the spectral cut-off, and the Landweber-Fridman, to stabilize the inverse of the covariance matrix in the investment process. These regularization schemes involve a tuning parameter that needs to be chosen. So, we propose a data-driven method for selecting the tuning parameter in an optimal way. The resulting regularized rules are compared to several strategies such as the most diversified portfolio, the target portfolio, the global minimum variance portfolio, and the naive 1/N strategy in terms of in-sample and out-of-sample Sharpe ratio.
Book Synopsis Worst-Case Approach to Strategic Optimal Portfolio Selection Under Transaction Costs and Trading Limits by : Nikolay Andreev
Download or read book Worst-Case Approach to Strategic Optimal Portfolio Selection Under Transaction Costs and Trading Limits written by Nikolay Andreev and published by . This book was released on 2016 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a worst-case scenario approach to the stochastic dynamic programming problem, presenting a general probability-based framework and some properties of the arising Bellman-Isaacs equation which allow to obtain a closed-form analytic solution. We also adapt the results for a discrete financial market and the problem of strategic portfolio selection in the presence of transaction costs and trading limits with unspecified stochastic process of market parameters. Unlike the classic stochastic programming, the approach is model-free while the solution can be easily found numerically under economically reasonable assumptions. All results hold for a general class of utility functions and several risky assets. For a special case of proportional transaction costs and CRRA utility, we present a numerical scheme which allows to reduce the dimensionality of the Bellman-Isaacs equation by a number of risky assets.
Book Synopsis A Unified Approach to Portfolio Optimization with Linear Transaction Costs by : Valeriy Zakamulin
Download or read book A Unified Approach to Portfolio Optimization with Linear Transaction Costs written by Valeriy Zakamulin and published by . This book was released on 2010 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the continuous time optimal portfolio selection problem for an investor with a finite horizon who maximizes expected utility of terminal wealth and faces transaction costs in the capital market. It is well known that, depending on a particular structure of transaction costs, such a problem is formulated and solved within either stochastic singular control or stochastic impulse control framework. In this paper we propose a unified framework, which generalizes the contemporary approaches and is capable to deal with any problem where transaction costs are a linear/piecewise-linear function of the volume of trade. We also discuss some methods for solving numerically the problem within our unified framework.
Book Synopsis Application of Stochastic Control to Portfolio Selection with Transaction Costs by : Agnès Sulem
Download or read book Application of Stochastic Control to Portfolio Selection with Transaction Costs written by Agnès Sulem and published by . This book was released on 1989 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Optimal Portfolio Selection with Transaction Costs : a Model with Non-constant Transaction Cost Rate by : Andriy Demchuk
Download or read book Optimal Portfolio Selection with Transaction Costs : a Model with Non-constant Transaction Cost Rate written by Andriy Demchuk and published by . This book was released on 1999 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multi-Period Trading Via Convex Optimization by : Stephen Boyd
Download or read book Multi-Period Trading Via Convex Optimization written by Stephen Boyd and published by . This book was released on 2017-07-28 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph collects in one place the basic definitions, a careful description of the model, and discussion of how convex optimization can be used in multi-period trading, all in a common notation and framework.
Book Synopsis Numerical Methods in Finance by : René Carmona
Download or read book Numerical Methods in Finance written by René Carmona and published by Springer Science & Business Media. This book was released on 2012-03-23 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerical methods in finance have emerged as a vital field at the crossroads of probability theory, finance and numerical analysis. Based on presentations given at the workshop Numerical Methods in Finance held at the INRIA Bordeaux (France) on June 1-2, 2010, this book provides an overview of the major new advances in the numerical treatment of instruments with American exercises. Naturally it covers the most recent research on the mathematical theory and the practical applications of optimal stopping problems as they relate to financial applications. By extension, it also provides an original treatment of Monte Carlo methods for the recursive computation of conditional expectations and solutions of BSDEs and generalized multiple optimal stopping problems and their applications to the valuation of energy derivatives and assets. The articles were carefully written in a pedagogical style and a reasonably self-contained manner. The book is geared toward quantitative analysts, probabilists, and applied mathematicians interested in financial applications.
Book Synopsis Applied Quantitative Finance by : Wolfgang Karl Härdle
Download or read book Applied Quantitative Finance written by Wolfgang Karl Härdle and published by Springer. This book was released on 2017-08-02 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume provides practical solutions and introduces recent theoretical developments in risk management, pricing of credit derivatives, quantification of volatility and copula modeling. This third edition is devoted to modern risk analysis based on quantitative methods and textual analytics to meet the current challenges in banking and finance. It includes 14 new contributions and presents a comprehensive, state-of-the-art treatment of cutting-edge methods and topics, such as collateralized debt obligations, the high-frequency analysis of market liquidity, and realized volatility. The book is divided into three parts: Part 1 revisits important market risk issues, while Part 2 introduces novel concepts in credit risk and its management along with updated quantitative methods. The third part discusses the dynamics of risk management and includes risk analysis of energy markets and for cryptocurrencies. Digital assets, such as blockchain-based currencies, have become popular b ut are theoretically challenging when based on conventional methods. Among others, it introduces a modern text-mining method called dynamic topic modeling in detail and applies it to the message board of Bitcoins. The unique synthesis of theory and practice supported by computational tools is reflected not only in the selection of topics, but also in the fine balance of scientific contributions on practical implementation and theoretical concepts. This link between theory and practice offers theoreticians insights into considerations of applicability and, vice versa, provides practitioners convenient access to new techniques in quantitative finance. Hence the book will appeal both to researchers, including master and PhD students, and practitioners, such as financial engineers. The results presented in the book are fully reproducible and all quantlets needed for calculations are provided on an accompanying website. The Quantlet platform quantlet.de, quantlet.com, quantlet.org is an integrated QuantNet environment consisting of different types of statistics-related documents and program codes. Its goal is to promote reproducibility and offer a platform for sharing validated knowledge native to the social web. QuantNet and the corresponding Data-Driven Documents-based visualization allows readers to reproduce the tables, pictures and calculations inside this Springer book.
Book Synopsis Financial Markets in Continuous Time by : Rose-Anne Dana
Download or read book Financial Markets in Continuous Time written by Rose-Anne Dana and published by Springer Science & Business Media. This book was released on 2007-07-12 with total page 331 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explains key financial concepts, mathematical tools and theories of mathematical finance. It is organized in four parts. The first brings together a number of results from discrete-time models. The second develops stochastic continuous-time models for the valuation of financial assets (the Black-Scholes formula and its extensions), for optimal portfolio and consumption choice, and for obtaining the yield curve and pricing interest rate products. The third part recalls some concepts and results of equilibrium theory and applies this in financial markets. The last part tackles market incompleteness and the valuation of exotic options.
Book Synopsis Performance Measurement in Corporate Governance by : Alex Manzoni
Download or read book Performance Measurement in Corporate Governance written by Alex Manzoni and published by Springer Science & Business Media. This book was released on 2009-04-30 with total page 237 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the global knowledge economy, corporate governance, organisational behaviour and performance of the supply chain are becoming increasingly important aspects of the evaluation of an enterprise. The subject of this book is the development of a contemporary organisation behaviour performance measurement (OBPM) model for enterprises in the modern economy. The fields of organisation behaviour and supply chain management are integrated with an Open Socio-Technical Systems theory of management and the application of Operations Research to corporate governance for the measurement of organisation performance. This book thereby offers a new and innovative quantitative approach to qualitative concepts of corporate performance measurement and makes a significant contribution to the fields of management theory, supply chain management as well as operations research.
Book Synopsis Risk and Asset Allocation by : Attilio Meucci
Download or read book Risk and Asset Allocation written by Attilio Meucci and published by Springer Science & Business Media. This book was released on 2009-05-22 with total page 547 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discusses in the practical and theoretical aspects of one-period asset allocation, i.e. market Modeling, invariants estimation, portfolia evaluation, and portfolio optimization in the prexence of estimation risk The book is software based, many of the exercises simulate in Matlab the solution to practical problems and can be downloaded from the book's web-site
Book Synopsis Ubiquitous Quantum Structure by : Andrei Y. Khrennikov
Download or read book Ubiquitous Quantum Structure written by Andrei Y. Khrennikov and published by Springer Science & Business Media. This book was released on 2010-01-23 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quantum-like structure is present practically everywhere. Quantum-like (QL) models, i.e. models based on the mathematical formalism of quantum mechanics and its generalizations can be successfully applied to cognitive science, psychology, genetics, economics, finances, and game theory. This book is not about quantum mechanics as a physical theory. The short review of quantum postulates is therefore mainly of historical value: quantum mechanics is just the first example of the successful application of non-Kolmogorov probabilities, the first step towards a contextual probabilistic description of natural, biological, psychological, social, economical or financial phenomena. A general contextual probabilistic model (Växjö model) is presented. It can be used for describing probabilities in both quantum and classical (statistical) mechanics as well as in the above mentioned phenomena. This model can be represented in a quantum-like way, namely, in complex and more general Hilbert spaces. In this way quantum probability is totally demystified: Born's representation of quantum probabilities by complex probability amplitudes, wave functions, is simply a special representation of this type.
Book Synopsis Decision Making Structures by : Mario S. Catalani
Download or read book Decision Making Structures written by Mario S. Catalani and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is the cuhnination of many years' research inspired by the pioneering and seminal works of Sah and Stiglitz. We gratefully acknowledge the influence of these two authors, whose ideas and contributions have brought us together on this collabo ration, despite our divergent scientific backgrounds (while Catalani is interested in quantitative methods, Clerico is a non-quantitative economist) . We thank the Editor of the Rivista Internazionale di Scienze Economiche e Commerciali for permission to use slightly modified versions of papers published in that Review (they are the content of Chapters I and III of Part I, and of Chapter I of Part II). We heartily thank Ms. Laura McLean for carefully revising our English. The publication of this book has been made possible by a grant from the Department of Economics, University of Turin, Italy. Torino, July 1995 Mario S. Catalani Giuseppe F. CIeri co CONTENTS Introduction 1 PART I Some models of decision making structures I. How and when unanimity is a superior decision rule 15 II. Majority rules and efficiency of the decision process 31 III. Team cooperation vs. independent assessment 41 IV. Leadership and dependence 59 V. The decision making process of political organizations 75 PART II Pyramid decision structures I. Pyramidal structures: a preliminary note 91 II. Other properties of pyramids 103 III. Pyramids and dependence 117 IV. Organization, loyalty, and efficiency 133 Conclusions 151 References 163 Mario S.
Book Synopsis The Mathematics of Preference, Choice and Order by : Steven Brams
Download or read book The Mathematics of Preference, Choice and Order written by Steven Brams and published by Springer Science & Business Media. This book was released on 2009-02-11 with total page 412 pages. Available in PDF, EPUB and Kindle. Book excerpt: Peter Fishburn has had a splendidly productive career that led to path-breaking c- tributions in a remarkable variety of areas of research. His contributions have been published in a vast literature, ranging through journals of social choice and welfare, decision theory, operations research, economic theory, political science, mathema- cal psychology, and discrete mathematics. This work was done both on an individual basis and with a very long list of coauthors. The contributions that Fishburn made can roughly be divided into three major topical areas, and contributions to each of these areas are identi?ed by sections of this monograph. Section 1 deals with topics that are included in the general areas of utility, preference, individual choice, subjective probability, and measurement t- ory. Section 2 covers social choice theory, voting models, and social welfare. S- tion 3 deals with more purely mathematical topics that are related to combinatorics, graph theory, and ordered sets. The common theme of Fishburn’s contributions to all of these areas is his ability to bring rigorous mathematical analysis to bear on a wide range of dif?cult problems.
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