We apply numerical dynamic programming to multi-asset dynamic portfolio optimization problems with proportional transaction costs. Examples include problems with one safe asset plus two to six risky stocks, and seven to 360 trading periods in a finite horizon problem. These examples show that it...

We implement a dynamic programming algorithm on a computational grid consisting of loosely coupled processors, possibly including clusters and individual workstations. The grid changes dynamically during the computation, as processors enter and leave the pool of workstations. The algorithm is...

Value at Risk (VaR) has emerged in recent years as a standard tool to measure and control the risk of trading portfolios.Yet,existing theoretical analyses of the optimal behavior of a trader subject to VaR limits have produced a negative view of VaR as a risk-control tool. In particular,VaR...

In this paper we study the optimal portfolio management for the constant relative-risk averse investor who maximizes an expected utility of his terminal wealth and who faces transaction costs during his trades. In our model the investor's portfolio consists of one risky and one risk-free asset,...

We present a geometric approach to discrete time multiperiod mean variance portfolio optimization that largely simplifies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decomposed in an orthogonal...

Constraints on downside risk, measured by shortfall probability, expected shortfall, semi-variance etc., lead to optimal asset allocations which differ from the meanvariance optimum. The resulting optimization problem can become quite complex as it exhibits multiple local extrema and...

We present a model in which a sovereign country optimally decides on its consumption and investment policies as well as on the optimal time to default. In the paper we allow the sovereign borrower to keep the fraction of its augmented wealth in so-called international reserves. We further assume...

In this paper, we solve the intertemporal investment problem of an investor holding a portfolio of default-free and defaultable bonds. Default-risk is modeled in an intensity based framework with state variables following an affine diffusion. The structure of the optimal portfolio over time is...

To obtain the maximum benefits from diversification, financial theory suggests that investors should invest internationally because of the larger potential for risk reduction stemming from the lower correlation exisiting between assets of different countries. The question that we raise in this...

This paper investigates to what extent and through which channels that health and educational attainment are interdependent. A dynamic model of schooling, work, health expenditure, and savings is developed. The structural framework explicitly models two existing hypotheses on the correlation...