Vitenskapelig artikkel

Optimal rebalancing of portfolios with transaction costs

Holden, Helge; Holden, Lars


Tidsskrift: Stochastics: An International Journal of Probability and Stochastic Processes, vol. 85, p. 371–394, 2013

Utgivere: Taylor & Francis

Utgave: 3

Internasjonale standardnumre:
Trykt: 1744-2508
Elektronisk: 1744-2516


Rebalancing of portfolios with a concave utility function is considered. It is proved that transaction costs imply that there is a no-trade region where it is optimal not to trade. For proportional transaction costs, it is optimal to rebalance to the boundary when outside the no-trade region. With flat transaction costs, the rebalance from outside the no-trade region should be to an internal state in the no-trade region but never a full rebalance. The standard optimal portfolio theory is extended to an arbitrary number of equally treated assets, general utility function and more general stochastic processes. Examples are discussed.