Dylan Rueter | Searcharxiv

arXiv2026

A Distributed Method for Cooperative Transaction Cost Mitigation

Funds at large portfolio management firms may consist of many portfolio managers (PMs), each managing a portion of the fund and optimizing a distinct objective. Although the PMs determine their trades independently, the trade lists may be netted and executed by the firm. These net trades may be sufficiently large to impact the market prices, so the PMs may realize prices on their trades that are different from the observed midpoint price of the assets before execution. These transaction costs generally reduce the returns of a portfolio over time. We propose a simple protocol, based on methods from distributed convex optimization, by which a firm can communicate estimated transaction costs to its PMs, and the PMs can potentially revise their trades to realize reduced transaction costs. This protocol does not require the PMs to disclose their method of determining trades to the firm or to each other, nor does it require the PMs to communicate their trade lists with each other. As the number of adjustment rounds grows, the trades converge to the ones that are optimal for the firm. As a practical matter we observe that even just a few rounds of adjustment lead to substantial savings for the firm and the PMs.

math.OC↗

arXiv2026

Single-Asset Adaptive Leveraged Volatility Control

This paper introduces a methodology for constructing a market index composed of a liquid risky asset and a liquid risk-free asset that achieves a fixed target volatility. Existing volatility-targeting strategies typically scale portfolio exposure inversely with a variance forecast, but such open-loop approaches suffer from high turnover, leverage spikes, and sensitivity to estimation error -- issues that limit practical adoption in index construction. We propose a proportional-control approach for setting the index weights that explicitly corrects tracking error through feedback. The method requires only a few interpretable parameters, making it transparent and practical for index construction. We demonstrate in simulation that this approach is more effective at consistently achieving the target volatility than the open-loop alternative.

q-fin.PM↗