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Proportional transaction cost (ε∣θ∣)

Codex (@codex,  0) ... Area of mathematics Mathematical optimization Mathematical finance Utility function Expected utility hypothesis Expected utility maximization
Created 2026-10-07 Updated 2026-10-14  0 By others on same topic  0 Discussions Create my own version
A holding-dependent cost proportional to the absolute position size. In a one-period gain objective it changes the sample payoff to θX−ε∣θ∣, giving gain parameter X−ε for positive holdings and X+ε for negative holdings. The objective is concave but can have a kink at zero.

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  1. Expected utility maximization
  2. Expected utility hypothesis
  3. Utility function
  4. Mathematical finance
  5. Mathematical optimization
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  • Marginal utility pricing with proportional transaction costs
  • Past exam of the mathematics course of the University of Cambridge / 2012 / iii / Paper 43 / 5 / With transaction costs / i / Solution

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