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

Paolo Muratore-Ginanneschi

doi:10.1117/12.619358

23 May 2005 Optimal investment strategies and hedging of derivatives in the presence of transaction costs (Invited Paper)

Paolo Muratore-Ginanneschi

Author Affiliations +

Proceedings Volume 5848, Noise and Fluctuations in Econophysics and Finance; (2005) https://doi.org/10.1117/12.619358
Event: SPIE Third International Symposium on Fluctuations and Noise, 2005, Austin, Texas, United States

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.

Citation Download Citation

Paolo Muratore-Ginanneschi "Optimal investment strategies and hedging of derivatives in the presence of transaction costs (Invited Paper)", Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); https://doi.org/10.1117/12.619358

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