We present a simulation-and-regression method for solving dynamic portfolio optimization problems in the presence of general transaction costs, liquidity costs and market impact. This method extends the classical least squares Monte Carlo algorithm to incorporate switching costs, corresponding...

The volatility of concern in conventional volatility-managed strategies such as volatility-targeting strategy and mean-variance optimization is the expected conditional volatility. However for investors, it is the realized volatility that is important, because there is only one realization in...