Veraart, Luitgard A. M. 
ORCID: 0000-0003-1183-2227
(2011)
Optimal investment in the foreign exchange market with proportional transaction costs.
Quantitative Finance, 11 (4).
pp. 631-640.
ISSN 1469-7688
Abstract
We consider an investor in the foreign exchange market who can trade in two currencies, domestic and foreign. The investor seeks to optimize the expected mark-to-market value of the portfolio while aiming for a certain target proportion of the holdings in foreign currency compared with total wealth. This target proportion is exogenously given and can be thought of as a constraint imposed by risk management. The exchange rate process is modeled as a geometric Brownian motion. Proportional transaction costs are charged. We present a numerical algorithm that solves the resulting free boundary problem.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.tandf.co.uk/journals/rquf |
| Additional Information: | © 2010 Routledge, Taylor & Francis |
| Divisions: | Mathematics |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 11 May 2011 14:01 |
| Last Modified: | 23 Oct 2024 02:36 |
| URI: | http://eprints.lse.ac.uk/id/eprint/36103 |
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