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arXiv · 0707.3198

Growth-optimal portfolios under transaction costs

Jan Palczewski·Lukasz Stettner
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Abstract

This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that covers, in particular, the case of fixed plus proportional costs. We prove that there exists a self-financing trading strategy maximizing the average growth rate of the portfolio wealth. We show that this strategy has a Markovian form. Our result is obtained by large deviations estimates on empirical measures of the price process and by a generalization of the vanishing discount method to discontinuous transition operators.

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Jan Palczewski, Lukasz Stettner. 2007-07-21. Growth-optimal portfolios under transaction costs. https://arxiv.org/abs/0707.3198

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