Skip to main content
SpringerLink
Log in

The number of securities giving the maximum return in the presence of transaction costs

  • Original Paper
  • Published:
Quality & Quantity Aims and scope Submit manuscript

Abstract

An essential element of any realistic investment portfolio selection is the consideration of transaction costs. Our purpose, in this paper, is to determine the maximum return and the corresponding number of securities to buy giving such return, whenever practical constraints features related to budget, buy-in thresholds, and transaction costs are taken into consideration. Dealing with the portfolio selection and optimization problem in the point of view of individual investors, we will arrive to get an analytic result, leading to a new and simple alternative solution to heuristic algorithms. Moreover, this result can be considered as another approach to integer optimization.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Akian M., Menaldi J.L. and Sulem A. (1996). On an investment-consumption model with transaction costs. SIAM J. Control Optim. 34(1): 329–364

    Article  Google Scholar 

  • Chancelier, J.-P., Øksendal, B., Sulem, A.: Combined Stochastic Control and Optimal Stopping, and Application to Numerical Approximation of Combined Stochastic and Impulse Control. Department of Mathematics, University of Oslo (2000, Preprint)

  • Crama, Y., Schyns, M.: Simulated annealing for complex portfolio selection problems (2001, Preprint)

  • Davis M.H.A. and Norman A.R. (1990). Portfolio selection with transaction costs. Math. Oper. Res. 15(4): 676–713

    Google Scholar 

  • Dumas B. and Luciano E. (1991). An exact solution to a dynamic portfolio choice problem under transaction costs. J. Finance XLVI(2): 577–595

    Article  Google Scholar 

  • Eastham J. and Hastings K. (1988). Optimal impulse control of portfolios. Math. Oper. Res. 13: 588–605

    Article  Google Scholar 

  • Gili, M., Kêllezi, E.: A Heuristic approach to portfolio optimization (2000, Preprint)

  • Øksendal, B., Sulem, A.: Optimal Consumption and Portfolio with Both Fixed and Proportional Transaction Costs. Department of Mathematics, University of Oslo (1999, Preprint)

  • Mansini M. and Speranza M: (1999). Heuristic algorithms for the portfolio selection problem with minimum transaction lots. Eur. J. Oper. Res. 114: 219–233

    Article  Google Scholar 

  • Schroder, M.: Optimal Portfolio Selection with Fixed Transaction Costs: Numerical Solutions. Working Paper, Michigan State University (1995).

  • Shreve S. and Soner H.M. (1994). Optimal investment and consumption with transaction costs. Ann. Appl. Probab. 4: 609–692

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. CEREG University Paris Dauphine, Place de Lattre de Tassigny, Paris, 75775, France

    Souad Lajili-Jarjir

  2. ESLSCA Group, 1 Rue Bougainville, Paris, 75007, France

    Yves Rakotondratsimba

Authors
  1. Souad Lajili-Jarjir
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Yves Rakotondratsimba
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Souad Lajili-Jarjir.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Lajili-Jarjir, S., Rakotondratsimba, Y. The number of securities giving the maximum return in the presence of transaction costs. Qual Quant 42, 613–644 (2008). https://doi.org/10.1007/s11135-007-9126-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11135-007-9126-y

Keywords

Search

Navigation