Futures trading with transaction costs (Q1928878)
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scientific article; zbMATH DE number 6122094
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Futures trading with transaction costs |
scientific article; zbMATH DE number 6122094 |
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Futures trading with transaction costs (English)
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4 January 2013
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The authors consider the risky asset to be a futures price process modeled as an arithmetic Brownian motion. A probabilistic argument is developed to identify the loss in value when a proportional transaction cost is introduced. The paper also balances the marginal costs of the two effects caused by two sources of this loss: the first one is due to displacement (that arises because one cannot maintain the optimal portfolio of the zero-transaction-cost problem), and the second one due to transaction (when one adjusts the portfolio).
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futures contracts
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transection costs
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arithmetic Brownian motion
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utility functions
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Merton analysis
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