Abstract
We study the optimal portfolio selection problem with transaction costs. In general, the efficient frontier can be determined by solving a parametric non-quadratic programming problem. In a general setting, the transaction cost is a V-shaped function of difference between the existing and the new portfolio. We show how to transform this problem into a quadratic programming model. Hence a linear programming algorithm is applicable by establishing a linear approximation on the utility function of return and variance.
| Original language | English |
|---|---|
| Pages (from-to) | 107-117 |
| Journal | International Journal of Systems Science |
| Volume | 31 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Jan 2000 |
Bibliographical note
Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].Funding
This work isuporptdebytehNatonial Natraul Scinece FoundtinaofChianadastraegictresearch grant from tehCity University of Hong Kng. o
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