Optimal Rebalancing Frequencies for Multidimensional Portfolios

25 Pages Posted: 18 Oct 2015 Last revised: 14 Sep 2017

See all articles by Ibrahim Ekren

Ibrahim Ekren

Florida State University

Ren Liu

ETH Zürich

Johannes Muhle-Karbe

Carnegie Mellon University - Department of Mathematical Sciences

Date Written: May 24, 2017

Abstract

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

Ekren, Ibrahim and Liu, Ren and Muhle-Karbe, Johannes, Optimal Rebalancing Frequencies for Multidimensional Portfolios (May 24, 2017). Swiss Finance Institute Research Paper No. 15-44. Available at SSRN: https://ssrn.com/abstract=2675453 or http://dx.doi.org/10.2139/ssrn.2675453

Ibrahim Ekren

Florida State University ( email )

1017 Academic Way,
224 LOVE Building
Tallahassee, FL 32306
United States
7342741176 (Phone)

Ren Liu

ETH Zürich ( email )

Rämistrasse 101
Zurich, CH-8092
Switzerland

Johannes Muhle-Karbe (Contact Author)

Carnegie Mellon University - Department of Mathematical Sciences ( email )

Pittsburgh, PA 15213-3890
United States

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