A Primer on Portfolio Choice with Small Transaction Costs

Johannes Muhle-Karbe, Max Reppen and Halil Mete Soner
Additional contact information
Johannes Muhle-Karbe: University of Michigan
Max Reppen: ETH Zurich
Halil Mete Soner: ETH Zurich and Swiss Finance Institute

No 16-74, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This survey is an introduction to asymptotic methods for portfolio-choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and simplify them in the small-cost limit. This allows to obtain explicit solutions in a wide range of settings, which we illustrate for a model with mean-reverting expected returns and proportional transaction costs. For even more complex models, we present a policy iteration scheme that allows to compute the solution numerically.

JEL-codes: C61 G11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2016-12
New Economics Papers: this item is included in nep-cmp
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2881374 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1674

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().