Universal Investment in Markets with Transaction Costs

13 Pages Posted: 23 Mar 2005

See all articles by Garud Iyengar

Garud Iyengar

Columbia University - Department of Industrial Engineering and Operations Research (IEOR)

Abstract

In this paper we investigate growth optimal investment in two-asset discrete-time markets with proportional transaction costs and no distributional assumptions on the market return sequences. We construct a policy with growth rate at least as large as any interval policy. Since interval policies are mu-optimal for independent and identically distributed (i.i.d.) markets (Iyengar 2002), it follows that our policy when employed in an i.i.d. market is able to "learn" the optimal interval policy and achieve growth optimality; in other words, it is a universal growth optimal policy for i.i.d. markets.

Suggested Citation

Iyengar, Garud, Universal Investment in Markets with Transaction Costs. Mathematical Finance, Vol. 15, No. 2, pp. 359-371, April 2005. Available at SSRN: https://ssrn.com/abstract=687246

Garud Iyengar (Contact Author)

Columbia University - Department of Industrial Engineering and Operations Research (IEOR) ( email )

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