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Portfolio selection with exogenous and endogenous transaction costs under a two-factor stochastic volatility model
Dong Yan / Ke Zhou / Xin-Jiang He / Zirun Wang
deep learning / liquidity riskResource overview

Portfolio selection with exogenous and endogenous transaction costs under a two-factor stochastic volatility model

Paper2025

by Dong Yan, Ke Zhou, Xin-Jiang He, Zirun Wang

Tags
deep learningliquidity riskoptimizationpartial differential equationsportfolio optimizationtransaction costs

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Understand this paper

Suggested foundations for portfolio construction and volatility models and surfaces. Specialist prerequisites vary by paper.

Before you read

  1. Eigenvalues and Covariance Matrices

    Understand the covariance structure of portfolio risk.

  2. Constrained and Convex Optimisation

    Read objectives, constraints and optimality conditions.

  3. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  4. ARCH and GARCH

    Separate conditional volatility from observed returns.

Go further

  1. Mean-Variance Optimisation

    Construct allocations and examine sensitivity to estimated inputs.

  2. Portfolio Constraints

    Turn mathematical weights into feasible portfolio decisions.

  3. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

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