Tid: 12 mars 2007 kl 15.15-16.00

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Mathias Tedesund

Titel: Index Tracking under Fixed and Variable Transaction Costs. (Examensarbete)

Sammanfattning: The purpose of this thesis is to investigate how both fixed and variable transaction costs can be accounted for when managing an index tracking portfolio and how the trade-off between deviating from the benchmark and the size of transaction costs varies for different portfolios.

To do this we address the rebalancing problem of optimal tracking an index under fixed and proportional transaction costs. This is done within the mean variance framework by suggesting a simulation model, where we can test how different strategies affect the total transaction costs and the portfolio performance.

First, we describe a heuristic approach to deal with the fixed transaction costs function in the mean variance portfolio optimization procedure and apply it to a trading strategy including a tracking error target.

We further look at how a positive cash holding strategy can be used to control transaction costs and describe how optimal cash weight limits can be calculated, in presence of fixed and proportional transaction costs, using impulse control techniques.

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