6533b82cfe1ef96bd128fead
RESEARCH PRODUCT
Optimal Index Tracking Under Transaction Costs and Impulse Control
Ralf KornI. R. C. Buckleysubject
Transaction costMathematical optimizationActuarial scienceIndex (economics)media_common.quotation_subjectImpulse controlTracking errorCashEconomicsPortfolioProject portfolio managementCash managementGeneral Economics Econometrics and FinanceFinancemedia_commondescription
We apply impulse control techniques to a cash management problem within a mean-variance framework. We consider the strategy of an investor who is trying to minimise both fixed and proportional transaction costs, whilst minimising the tracking error with respect to an index portfolio. The cash weight is constantly fluctuating due to the stochastic inflow and outflow of dividends and liabilities. We show the existence of an optimal strategy and compute it numerically.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 1998-07-01 | International Journal of Theoretical and Applied Finance |