Index tracking with fixed and variable transaction costs

2012 ◽  
Vol 8 (1) ◽  
pp. 61-80 ◽  
Author(s):  
H. Mezali ◽  
J. E. Beasley
Keyword(s):  
Transaction Costs ◽  
Index Tracking ◽  
Variable Transaction Costs

Optimal Index Tracking Under Transaction Costs and Impulse Control

1998 ◽  
Vol 01 (03) ◽  
pp. 315-330 ◽  
Author(s):  
I. R. C. Buckley ◽  
R. Korn
Keyword(s):  
Transaction Costs ◽  
Optimal Strategy ◽  
Impulse Control ◽  
Tracking Error ◽  
Management Problem ◽  
Index Tracking ◽  
Cash Management ◽  
Proportional Transaction Costs ◽  
Control Techniques ◽  
Mean Variance

We apply impulse control techniques to a cash management problem within a mean-variance framework. We consider the strategy of an investor who is trying to minimise both fixed and proportional transaction costs, whilst minimising the tracking error with respect to an index portfolio. The cash weight is constantly fluctuating due to the stochastic inflow and outflow of dividends and liabilities. We show the existence of an optimal strategy and compute it numerically.

scholarly journals Index Tracking com Controle do Número de Ativos

2014 ◽  
Vol 12 (1) ◽  
pp. 89 ◽  
Author(s):  
Leonardo Riegel Sant'Anna ◽  
Tiago Pascoal Filomena ◽  
Denis Borenstein
Keyword(s):  
Transaction Costs ◽  
Investment Strategy ◽  
Index Tracking ◽  
Tracking Problem ◽  
Heuristic Approaches

Index tracking is a passive investment strategy, which aims at generating portfolios to reproduce a specific market index’s performance. This article proposes a model for a index tracking problem with control on the number of assets in the portfolio, which corresponds to a restriction in transaction costs. The model is applied to Ibovespa (sample: 67 stocks) from January/2009 to July/2012. Portfolios were formed without limiting the amount of stocks and limiting this amount to 40, 30 and 20 stocks, with rebalancing periods of 20, 40 and 60 trading days. The results were satisfactory especially for the 60 days rebalancing period, in which transaction costs become lower due to the longer rebalancing period. We also verified that changes in Cplex parameters didn’t influence the results especially in relation to the computational times. Therefore, we also conclude about the need of using heuristic approaches to form portfolios with smaller amounts of assets.

MINIMAL COST INDEX TRACKING UNDER NONLINEAR TRANSACTION COSTS AND MINIMAL TRANSACTION UNIT CONSTRAINTS

2001 ◽  
Vol 04 (06) ◽  
pp. 939-957 ◽  
Author(s):  
HIROSHI KONNO ◽  
ANNISTA WIJAYANAYAKE
Keyword(s):  
Transaction Costs ◽  
Portfolio Management ◽  
Computation Time ◽  
Least Square ◽  
Index Tracking ◽  
Minimal Cost ◽  
Discrete Variables ◽  
Cost Index ◽  
Nonconvex Minimization ◽  
Least Square Problem

Index tracking is a very common and popular approach in portfolio management. When there is neither (nonconvex) transaction costs nor minimal transaction unit constraints, the problem can be formulated as a convex least square problem, so that it can be solved by standard methods. However, when the transaction cost is nonconvex and not negligible, or if there is a minimal unit constraint on the amount of transaction, the problem becomes a nonconvex minimization problem with discrete variables. In this paper, we will propose a branch and bound algorithm for solving this class of problems and show that it can solve an index tracking problem of practical size in a reasonable amount of computation time.

From transaction costs to transaction value: Overcoming the frictional paradigm

2020 ◽  
pp. 51-81
Author(s):  
D. P. Frolov
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Path Dependence ◽  
Transaction Cost Economics ◽  
Cost Minimization ◽  
Low Cost ◽  
Coase Theorem ◽  
Transactional Analysis ◽  
Transaction Sector ◽  
Transaction Value

The transaction cost economics has accumulated a mass of dogmatic concepts and assertions that have acquired high stability under the influence of path dependence. These include the dogma about transaction costs as frictions, the dogma about the unproductiveness of transactions as a generator of losses, “Stigler—Coase” theorem and the logic of transaction cost minimization, and also the dogma about the priority of institutions providing low-cost transactions. The listed dogmas underlie the prevailing tradition of transactional analysis the frictional paradigm — which, in turn, is the foundation of neo-institutional theory. Therefore, the community of new institutionalists implicitly blocks attempts of a serious revision of this dogmatics. The purpose of the article is to substantiate a post-institutional (alternative to the dominant neo-institutional discourse) value-oriented perspective for the development of transactional studies based on rethinking and combining forgotten theoretical alternatives. Those are Commons’s theory of transactions, Wallis—North’s theory of transaction sector, theory of transaction benefits (T. Sandler, N. Komesar, T. Eggertsson) and Zajac—Olsen’s theory of transaction value. The article provides arguments and examples in favor of broader explanatory possibilities of value-oriented transactional analysis.

Non-Public Monetary Systems in information Economy

2013 ◽  
pp. 151-159
Author(s):  
O. Krasilnikov ◽  
E. Krasilnikova
Keyword(s):  
Transaction Costs ◽  
Information Economy ◽  
Internet Technologies ◽  
Monetary Systems ◽  
Public Money ◽  
Economic Institution

The article discusses the development of non-public monetary systems (NPMS), defined as a specific economic institution. It presents their comparison with public money systems depending on the size of transaction costs. The authors come to the conclusion that in conditions of the information economy on the basis of Internet-technologies NPMS receive a new impetus to their development and can make serious competition in regard to public monetary systems.

Transactions in science in comparative perspective

2018 ◽  
pp. 52-69
Author(s):  
A. N. Oleinik
Keyword(s):  
Transaction Costs ◽  
Academic Freedom ◽  
North American ◽  
Institutional Environment ◽  
Scientific Productivity ◽  
Institutional Environments ◽  
Academic Administrator ◽  
The North ◽  
American Case ◽  
Transactional Approach

The article develops a transactional approach to studying science. Two concepts play a particularly important role: the institutional environment of science and scientific transaction. As an example, the North-American and Russian institutional environments of science are compared. It is shown that structures of scientific transactions (between peers, between the scholar and the academic administrator, between the professor and the student), transaction costs and the scope of academic freedom differ in these two cases. Transaction costs are non-zero in both cases, however. At the same time, it is hypothesized that a greater scope of academic freedom in the North American case may be a factor contributing to a higher scientific productivity.

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