A new portfolio rebalancing model with transaction costs

DOI10.1155/2014/942374MaRDI QIDQ2336854zbMATH OpenOpenAlexWikidataFDO

Authors Meihua Wang, Cheng Li, H. Xue, Feng-Min Xu

Publication date 19 November 2019

Published in Journal of Applied Mathematics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2014/942374

Mathematics Subject Classification ID

Portfolio theory (91G10) Statistical methods; risk measures (91G70)

Review text

Summary: A portfolio rebalancing model with self-finance strategy and consideration of V-shaped transaction cost is presented in this paper. Our main contribution is that a new constraint is introduced to confirm that the rebalance necessity of the existing portfolio needs to be adjusted. The constraint is constructed by considering both the transaction amount and transaction cost without any additional supply to the investment amount. The V-shaped transaction cost function is used to calculate the transaction cost of the portfolio, and conditional value at risk (CVaR) is used to measure the risk of the portfolios. Computational tests on practical financial data show that the proposed model is effective and the rebalanced portfolio increases the expected return of the portfolio and reduces the CVaR risk of the portfolio.

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Cited in

(10)

• Dealing with complex transaction costs in portfolio management
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• Rebalancing with Linear and Quadratic Costs
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• Constant rebalanced portfolio optimization under nonlinear transaction costs
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