UNIVERSAL INVESTMENT IN MARKETS WITH TRANSACTION COSTS

Garud Iyengar

Mathematical Finance, 2005, vol. 15, issue 2, 359-371

Abstract: In this paper we investigate growth optimal investment in two‐asset discrete‐time markets with proportional transaction costs and no distributional assumptions on the market return sequences. We construct a policy with growth rate at least as large as any interval policy. Since interval policies are ε‐optimal for independent and identically distributed (i.i.d.) markets (Iyengar 2002), it follows that our policy when employed in an i.i.d. market is able to “learn” the optimal interval policy and achieve growth optimality; in other words, it is a universal growth optimal policy for i.i.d. markets.

Date: 2005
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