Showing 1 - 10 of 41
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is kept above a certain threshold due to central bank...
Persistent link: https://www.econbiz.de/10011265866
We consider the regularity of sample paths of Volterra–Lévy processes. These processes are defined as stochastic integrals M(t)=∫0tF(t,r)dX(r),t∈R+, where X is a Lévy process and F is a deterministic real-valued function. We derive the spectrum of singularities and a result on the...
Persistent link: https://www.econbiz.de/10011064953
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor’s optimal policy and welfare. In doing so, we allow for general dynamics of the mid price, the...
Persistent link: https://www.econbiz.de/10011264619
A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so, we allow for general dynamics of the mid price, the...
Persistent link: https://www.econbiz.de/10011186126
<Para ID="Par1">An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the leading-order corrections to the frictionless value...</para>
Persistent link: https://www.econbiz.de/10011241197
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the optimal investment policy, its implied welfare, liquidity...
Persistent link: https://www.econbiz.de/10010728116
For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a "shadow price", i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of an explicit counter-example, we show that shadow prices...
Persistent link: https://www.econbiz.de/10010734010
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semimartingale...
Persistent link: https://www.econbiz.de/10010888107
We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of the underlying log-price. Here, we characterize the...
Persistent link: https://www.econbiz.de/10010847051
For utility maximization problems under proportional transaction costs, it has been observed that the original market with transaction costs can sometimes be replaced by a frictionless shadow market that yields the same optimal strategy and utility. However, the question of whether or not this...
Persistent link: https://www.econbiz.de/10010847057