Optimal execution for portfolio transactions

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.

Department dc:contributor.department

System Design and Management Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2007

Author dc:creator

• Fadeev, Alexander

Advisor dc:contributor.advisor

• John C. Cox.

• System Design and Management Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/42352

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/42352