Rebalancing with Linear and Quadratic Costs

Ren Liu, Johannes Muhle-Karbe and Marko Weber
Additional contact information
Ren Liu: ETH Zurich
Johannes Muhle-Karbe: ETH Zurich and Swiss Finance Institute
Marko Weber: Dublin City University and Scuola Normale Superiore

No 14-16, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for representative investors with constant relative risk aversion and a long horizon.

Keywords: price impact; transaction costs; portfolio choice; long-run (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2014-02
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1416

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