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Paper / 2018SMQ / 221670689687184
Shadow prices, fractional Brownian motion, and portfolio optimisation under transaction costs
Christoph Czichowsky / Junjian Yang / Rémi Peyre / Walter Schachermayer
brownian motion / mathematical financeResource overview

Shadow prices, fractional Brownian motion, and portfolio optimisation under transaction costs

Paper2018

by Christoph Czichowsky, Junjian Yang, Rémi Peyre, Walter Schachermayer

Tags
brownian motionmathematical financeoptimizationportfolio optimizationstochastic processes

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Understand this paper

Suggested foundations for stochastic processes and pricing and portfolio construction. Specialist prerequisites vary by paper.

Before you read

  1. Conditional Expectation

    Understand what it means to condition on current information.

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

    Follow Brownian dynamics and the second-order term in Itô calculus.

  3. Eigenvalues and Covariance Matrices

    Understand the covariance structure of portfolio risk.

  4. Constrained and Convex Optimisation

    Read objectives, constraints and optimality conditions.

Go further

  1. Market Model and Risk-Neutral Valuation

    Connect stochastic dynamics to no-arbitrage prices.

  2. Simulating SDEs

    Translate continuous dynamics into a numerical experiment.

  3. Mean-Variance Optimisation

    Construct allocations and examine sensitivity to estimated inputs.

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