Title :
Optimal Portfolio Control with Trading Strategies of Finite Variation
Author :
Gashi, Bujar ; Date, Paresh
Author_Institution :
Center for the Analysis of Risk and Optimisation Modelling Applications, School of Information Systems, Computing and Mathematics, Brunel University, Uxbridge, UB8 3PH, U.K. Email address: bujar.gashi@brunel.ac.uk.
Abstract :
We propose a method for portfolio selection with trading strategies constrained to having a finite variation. A linear combination of logarithms of each asset holdings values are used as a criterion, which also includes a penalty on the logarithmic rates of change of trading strategies. A simulation example shows a significant reduction in transaction cost as compared to a log-optimal portfolio.
Keywords :
Finite variation; log-optimal portfolio; no short selling; optimal control; transaction cost; Asset management; Cost function; Information analysis; Information systems; Investments; Mathematical model; Mathematics; Optimal control; Portfolios; Risk analysis; Finite variation; log-optimal portfolio; no short selling; optimal control; transaction cost;
Conference_Titel :
Decision and Control, 2005 and 2005 European Control Conference. CDC-ECC '05. 44th IEEE Conference on
Print_ISBN :
0-7803-9567-0
DOI :
10.1109/CDC.2005.1582877
