Optimal Rebalancing Frequencies for Multidimensional Portfolios
25 Pages Posted: 18 Oct 2015 Last revised: 14 Sep 2017
Date Written: May 24, 2017
We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit formulas for these and the associated welfare losses due to small transaction costs in a general, multidimensional diffusion setting, and compare their performance to a number of alternatives using Monte Carlo simulations.
Keywords: transaction costs, optimal trading frequency, optimal investment, multiple assets
JEL Classification: G11
Suggested Citation: Suggested Citation