Asymptotics for fixed transaction costs

Albert Altarovici; Johannes Muhle-Karbe; Halil Mete Soner

doi:10.1007/s00780-015-0261-3

Asymptotics for fixed transaction costs

Albert Altarovici, Johannes Muhle-Karbe, Halil Mete Soner

Research output: Contribution to journal › Article › peer-review

27 Scopus citations

Abstract

An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the leading-order corrections to the frictionless value function and optimal policy.

Original language	English (US)
Pages (from-to)	363-414
Number of pages	52
Journal	Finance and Stochastics
Volume	19
Issue number	2
DOIs	https://doi.org/10.1007/s00780-015-0261-3
State	Published - Apr 2015
Externally published	Yes

All Science Journal Classification (ASJC) codes

Statistics and Probability
Finance
Statistics, Probability and Uncertainty

Keywords

Asymptotic expansions
Fixed transaction costs
Homogenization
Optimal investment and consumption
Viscosity solutions

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10.1007/s00780-015-0261-3

Cite this

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title = "Asymptotics for fixed transaction costs",

abstract = "An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the leading-order corrections to the frictionless value function and optimal policy.",

keywords = "Asymptotic expansions, Fixed transaction costs, Homogenization, Optimal investment and consumption, Viscosity solutions",

author = "Albert Altarovici and Johannes Muhle-Karbe and Soner, {Halil Mete}",

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year = "2015",

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doi = "10.1007/s00780-015-0261-3",

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AU - Muhle-Karbe, Johannes

AU - Soner, Halil Mete

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KW - Asymptotic expansions

KW - Fixed transaction costs

KW - Homogenization

KW - Optimal investment and consumption

KW - Viscosity solutions

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Asymptotics for fixed transaction costs

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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