Davis MHA

Fleming WH

Gerhold S

Grinold R

H. Mete Soner

Johannes Muhle-Karbe

Kozlov SM

Martin R

Max Reppen

Menaldi JL

Papanicolaou GC

 This review 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 how to simplify them in the small-cost limit. This allows one 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 more complex models, we present a policy iteration scheme that allows one to numerically compute the solution. </jats:p

Crossref

Annual Review of Financial Economics

A Primer on Portfolio Choice with Small Transaction Costs

A Primer on Portfolio Choice with Small Transaction Costs

Abstract

Similar works

Full text

Available Versions

Crossref