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Rebalancing with Linear and Quadratic Costs (1402.5306v3)
Published 21 Feb 2014 in q-fin.PM, math.OC, math.PR, and q-fin.TR
Abstract: We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for representative investors with constant relative risk aversion and a long horizon.