In this companion paper to “Optimal Investment with Transaction Costs and Stochastic Volatility Part I: Infinite Horizon”, "http://ssrn.com/abstract=2374150" http://ssrn.com/abstract=2374150, we give an accuracy proof for the finite time optimal investment and consumption problem under fast...

This supplemental appendix accompanies "Optimal Investment with Transaction Costs and Stochastic Volatility Part II: Finite Horizon" by the same authors, available at:"http://ssrn.com/abstract=2659918" http://ssrn.com/abstract=2659918. In this appendix we prove the verification theorem that the...

I introduce dynamic option trading and non-linear views into the classical portfolio selection problem. The optimal dynamic option portfolio is characterized explicitly in terms of its expected sensitivities (Greeks) and the role of the mean-variance effi cient portfolio is played by the "Greek...

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...

Attempted dynamic replication based valuation of equity options is analyzed using the Optimal Hedge Monte-Carlo (OHMC) method. Detailed here are (1) the option hedging strategy and its costs; (2) irreducible hedging errors associated with realistically fat-tailed & asymmetric return...

This paper considers the problem of European option pricing in the presence of proportional transaction costs when the price of the underlying follows a jump diffusion process. Using an approach that is based on maximization of the expected utility of terminal wealth, we transform the option...

We price a contingent claim liability using the utility indifference argument. We consider an agent with exponential utility, who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of a proportional...

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...

We investigate the optimal investment problem when the interest rate is stochastic and the investor must pay proportional transaction costs when buying and selling the risky assets. We first consider a portfolio of bonds and transaction costs.We then add a stock to the portfolio, and analyze the...