Download or read book Managing Transaction Costs in a Dynamic Trading Strategy written by James A. Sefton and published by . This book was released on 2015 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive an explicit solution to a continuous time dynamic portfolio problem assuming investors maximize their welfare from a consumption stream in an incomplete market where returns to the securities are predictable but costly to trade. The solution is phrased in terms of a risk-sensitive Riccati equation. We show that the optimal trading strategy is to target a portfolio that is the optimal solution to a frictionless (or 'no-cost') dynamic portfolio problem but where the returns to the assets have been adjusted for costs; that is they have been expressed on a net rather than gross basis. The legacy portfolio (the inherited undesirable positions) are then traded away in line with a backward-looking optimal execution problem. We show that the utility gradient is a stochastic discount factor that prices the assets net returns. Thus we are able to generalise some of the results of the martingale approach to dynamic portfolio theory to market with frictions.
Download or read book Dynamic trading with transaction costs written by Jakob Brix and published by . This book was released on 2014 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dynamic Trading written by Alexander J. T. Rathenborg and published by . This book was released on 2015 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dynamic Trading with Predictable Returns and Transaction Costs written by Nicolae Garleanu and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper derives in closed form the optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal updated portfolio is a linear combination of the existing portfolio, the optimal portfolio absent trading costs, and the optimal portfolio based on future expected returns and transaction costs. Predictors with slower mean reversion (alpha decay) get more weight since they lead to a favorable positioning both now and in the future. We implement the optimal policy for commodity futures and show that the resulting portfolio has superior returns net of trading costs relative to more naive benchmarks. Finally, we derive natural equilibrium implications, including that demand shocks with faster mean reversion command a higher return premium
Download or read book Dynamic Hedging written by Nassim Nicholas Taleb and published by John Wiley & Sons. This book was released on 1997-01-14 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Download or read book Strategic Asset Allocation written by John Y. Campbell and published by OUP Oxford. This book was released on 2002-01-03 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Download or read book Transaction Costs and Institutional Investor Trading Strategies written by Robert Alan Schwartz and published by . This book was released on 1988 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Economic Foundations of Strategy written by Joseph T. Mahoney and published by SAGE. This book was released on 2005 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: The theoretical foundations of management strategy are identified and outlined in this text. Five theories are considered in the light of questions about how organisations operate efficiently, cost minimization, wealth creation, individual self-interest, and continued growth.
Download or read book Optimal Dynamic Order Submission Strategies in Some Stylized Trading Problems written by Lawrence Harris and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Optimal dynamic limit and market order submission and resubmission strategies are derived for several stylized trading problems. Separate solutions are obtained for quote- and order-driven markets. The results provide practical rules for how to trade small orders and how to manage traders. Transaction cost measurement methods based on implementation shortfall are proven to dominate other methods. Since investors demand liquidity when they submit market orders and supply liquidity when they submit limit orders, the results improve our understanding of market liquidity. In particular, the models illustrate the role of time in the search for liquidity by characterizing the demand for and supply of immediacy.
Download or read book Trading Strategies in the Presence of Private Information and Transaction Costs written by and published by . This book was released on 1991 with total page 418 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Quantitative Equity Investing written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2010-03-01 with total page 528 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive look at the tools and techniques used in quantitative equity management Some books attempt to extend portfolio theory, but the real issue today relates to the practical implementation of the theory introduced by Harry Markowitz and others who followed. The purpose of this book is to close the implementation gap by presenting state-of-the art quantitative techniques and strategies for managing equity portfolios. Throughout these pages, Frank Fabozzi, Sergio Focardi, and Petter Kolm address the essential elements of this discipline, including financial model building, financial engineering, static and dynamic factor models, asset allocation, portfolio models, transaction costs, trading strategies, and much more. They also provide ample illustrations and thorough discussions of implementation issues facing those in the investment management business and include the necessary background material in probability, statistics, and econometrics to make the book self-contained. Written by a solid author team who has extensive financial experience in this area Presents state-of-the art quantitative strategies for managing equity portfolios Focuses on the implementation of quantitative equity asset management Outlines effective analysis, optimization methods, and risk models In today's financial environment, you have to have the skills to analyze, optimize and manage the risk of your quantitative equity investments. This guide offers you the best information available to achieve this goal.
Download or read book The Efficiency of Dynamic Trading Strategies in Imperfect Markets written by Harry M. Kat and published by . This book was released on 1993 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Mean Reversion Trading written by Tim Leung (Professor of industrial engineering) and published by World Scientific. This book was released on 2015-11-26 with total page 221 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Optimal Mean Reversion Trading: Mathematical Analysis and Practical Applications provides a systematic study to the practical problem of optimal trading in the presence of mean-reverting price dynamics. It is self-contained and organized in its presentation, and provides rigorous mathematical analysis as well as computational methods for trading ETFs, options, futures on commodities or volatility indices, and credit risk derivatives. This book offers a unique financial engineering approach that combines novel analytical methodologies and applications to a wide array of real-world examples. It extracts the mathematical problems from various trading approaches and scenarios, but also addresses the practical aspects of trading problems, such as model estimation, risk premium, risk constraints, and transaction costs. The explanations in the book are detailed enough to capture the interest of the curious student or researcher, and complete enough to give the necessary background material for further exploration into the subject and related literature. This book will be a useful tool for anyone interested in financial engineering, particularly algorithmic trading and commodity trading, and would like to understand the mathematically optimal strategies in different market environments."--
Download or read book The World of Risk Management written by H. Gifford Fong and published by World Scientific. This book was released on 2006 with total page 233 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk management is a foundation discipline for the prudent conduct of investment management. Being effective requires ongoing evolution and adaptation. In The World of Risk Management, an expert team of contributors that include Nobel Prize laureates Robert C Merton and Harry M Markowitz addresses the important issues arising in the practice of risk management. A common thread among these distinguished articles is a rigorous theoretical or conceptual basis. Illustrated with full color figures throughout, they discuss topics ranging from broad policy considerations to detailed how-to prescriptions, providing professionals and academics with useful practical implementations.
Download or read book The Science of Algorithmic Trading and Portfolio Management written by Robert Kissell and published by Academic Press. This book was released on 2013-10-01 with total page 492 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Science of Algorithmic Trading and Portfolio Management, with its emphasis on algorithmic trading processes and current trading models, sits apart from others of its kind. Robert Kissell, the first author to discuss algorithmic trading across the various asset classes, provides key insights into ways to develop, test, and build trading algorithms. Readers learn how to evaluate market impact models and assess performance across algorithms, traders, and brokers, and acquire the knowledge to implement electronic trading systems. This valuable book summarizes market structure, the formation of prices, and how different participants interact with one another, including bluffing, speculating, and gambling. Readers learn the underlying details and mathematics of customized trading algorithms, as well as advanced modeling techniques to improve profitability through algorithmic trading and appropriate risk management techniques. Portfolio management topics, including quant factors and black box models, are discussed, and an accompanying website includes examples, data sets supplementing exercises in the book, and large projects. Prepares readers to evaluate market impact models and assess performance across algorithms, traders, and brokers. Helps readers design systems to manage algorithmic risk and dark pool uncertainty. Summarizes an algorithmic decision making framework to ensure consistency between investment objectives and trading objectives.
Download or read book Multi Period Trading Via Convex Optimization written by Stephen Boyd and published by . This book was released on 2017-07-28 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph collects in one place the basic definitions, a careful description of the model, and discussion of how convex optimization can be used in multi-period trading, all in a common notation and framework.
Download or read book Optimal Dynamic Trading Strategies with Risk Limits written by Domenico Cuoco and published by . This book was released on 2002 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
