Growth-optimal investments and numeraire portfolios under transaction costs: An analysis based on the von Neumann-Gale model

Details Growth-optimal investments and numeraire portfolios under transaction costs: An analysis based on the von Neumann-Gale model Growth-optimal investments and numeraire portfolios under transaction costs: An analysis based on the von Neumann-Gale model

2009-09-25

arxiv.org/abs/0909.4730v1

Economy

Quantitative Finance

Portfolio Management

Scientific paper

The aim of this work is to extend the capital growth theory developed by Kelly, Breiman, Cover and others to asset market models with transaction costs. We define a natural generalization of the notion of a numeraire portfolio proposed by Long and show how such portfolios can be used for constructing growth-optimal investment strategies. The analysis is based on the classical von Neumann-Gale model of economic dynamics, a stochastic version of which we use as a framework for the modelling of financial markets with frictions.

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