Please use this identifier to cite or link to this item: http://buratest.brunel.ac.uk/handle/2438/3781
Title: Finite Horizon Portfolio Selection
Authors: Monoyios, M
Issue Date: 2001
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 01-05
Abstract: We study the problem of maximising expected utility of terminal wealth over a nite horizon, with one risky and one riskless asset available, and with trades in the risky asset subject to proportional transaction costs. In a discrete time setting, using a utility function with hyperbolic risk aversion, we prove that the optimal trading strategy is characterised by a function of time (t), which represents the ratio of wealth held in the risky asset to that held in the riskless asset. There is a time varying no transaction region with boundaries b(t) < s(t), such that the portfo- lio is only rebalanced when (t) is outside this region. The results are consistent with similar studies of the in nite horizon problem with in- termediate consumption, where the no transaction region has a similar, but time independent, characterisation. We solve the problem numerically and compute the boundaries of the no transaction region for typical model parameters. We show how the results ...
Description: http://www.brunel.ac.uk/about/acad/sssl/ssslresearch/efwps##2001
URI: http://bura.brunel.ac.uk/handle/2438/3781
Appears in Collections:Dept of Economics and Finance Research Papers

Files in This Item:
File Description SizeFormat 
01-05.pdf225.84 kBAdobe PDFView/Open


Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.