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Proceedings Paper

Optimal investment strategies and hedging of derivatives in the presence of transaction costs
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Paper Abstract

Investment strategies in multiplicative Markovian market models with transaction costs are defined using growth optimal criteria. The optimal strategy is shown to consist in holding the amount of capital invested in stocks within an interval around an ideal optimal investment. The size of the holding interval is determined by the intensity of the transaction costs and the time horizon. The inclusion of financial derivatives in the models is also considered. All the results presented in this contributions were previously derived in collaboration with E. Aurell.

Paper Details

Date Published: 23 May 2005
PDF: 11 pages
Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); doi: 10.1117/12.619358
Show Author Affiliations
Paolo Muratore-Ginanneschi, Univ. of Helsinki (Finland)

Published in SPIE Proceedings Vol. 5848:
Noise and Fluctuations in Econophysics and Finance
Derek Abbott; Jean-Philippe Bouchaud; Xavier Gabaix; Joseph L. McCauley, Editor(s)

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