Growth-optimal portfolios under transaction costs

DOI10.4064/AM35-1-1zbMATH Open1142.91556arXiv0707.3198OpenAlexW1979523357WikidataQ59903905 ScholiaQ59903905MaRDI QIDQ3498795FDOQ3498795

Authors: Jan Palczewski, Łukasz Stettner 

Publication date: 16 May 2008

Published in: Applicationes Mathematicae (Search for Journal in Brave)

Abstract: This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend 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.

Full work available at URL: https://arxiv.org/abs/0707.3198

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zbMATH Keywords

growth rateportfolio optimizationtransaction costslogarithmic utilityimpulsive strategy

Mathematics Subject Classification ID

Portfolio theory (91G10) Strong limit theorems (60F15) 2-person games (91A05)

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