Passive portfolio management over a finite horizon with a target liquidation value under transaction costs and solvency constraints

Dynamic portfolio management with transaction costs

We develop a recurrent reinforcement learning (RRL) system that directly induces portfolio management policies from time series of asset prices and indicators, while accounting for transaction costs. The RRL approach learns a direct mapping from indicator series to portfolio weights, bypassing the need to explicitly model the time series of price returns. The resulting policies dynamically opti...

Multi-Period Portfolio Optimization with Constraints and Transaction Costs

We consider the problem of multi-period portfolio optimization over a finite horizon, with a self-financing budget constraint and arbitrary distribution of asset returns, with objective to minimize the mean-square deviation of final wealth from a given desired value. When there are no additional constraints, this problem can be solved by standard dynamic programming; the optimal trading policy ...

Finite Horizon Optimal Investment and Consumption with Transaction Costs

This paper concerns continuous-time optimal investment and consumption decision of a CRRA investor who faces proportional transaction costs and finite time horizon. In the no consumption case, it has been studied by Liu and Loewenstein (2002) and Dai and Yi (2006). Mathematically, it is a singular stochastic control problem whose value function satisfies a parabolic variational inequality with ...

Optimal Portfolio Selection with Transaction Costs and Finite Horizons

We examine the optimal trading strategy for a CRRA investor who maximizes the expected utility of wealth on a finite date and faces transaction costs. Closed-form solutions are obtained when this date is uncertain. We then show a sequence of analytical solutions converge to the solution to the problem with a deterministic finite horizon. Consistent with the common life-cycle investment advice, ...

Portfolio Optimization Under Fixed Transaction Costs