Optimal execution for portfolio transactions
Name
234177429-MIT.pdf
Description
Full printable version
Size
4.43 MB
Format
Adobe PDF
Checksum (MD5)
fe1a5e22c8cb6390b10655003f3e9a0b
Author(s)
Fadeev, Alexander
Advisor(s)
John C. Cox.
Date Issued
2007
Publisher
Massachusetts Institute of Technology
Abstract
In my thesis I explore the problem of optimizing trading strategies for complex portfolio transitions. Institutional investors run into this issue during periodic portfolio rebalancing or transition between asset managers. The costs of rebalancing can be broadly broken into trading costs (both the transaction cost and the market impact) and the opportunity costs of delaying the execution and bearing the risk of current-to-target portfolio divergence. This thesis proposes a methodology for measuring the opportunity cost as well as a strategy that minimizes the proposed measure through optimal portfolio transition execution. The benefits from the proposed trading strategy are benchmarked against the industry standard portfolio trading practices.
Description
Thesis (S.M.)--Massachusetts Institute of Technology, System Design and Management Program, February 2007.
Includes bibliographical references.
Subjects
System Design and Management Program.
MIT Department
System Design and Management Program.
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