On the Convexity of the Instantaneous Impact Cost Function

This paper studies the form of the instantaneous impact cost function in a financial market with transaction costs via an axiomatic approach. We show that several kinds of convexity of the cost function are equivalent to the corresponding properties of the price impact functions. The results clarify...

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Bibliographic Details
Published inJournal of mathematical sciences (New York, N.Y.) Vol. 248; no. 1; pp. 116 - 122
Main Author Andreev, N. A.
Format Journal Article
LanguageEnglish
Published New York Springer US 01.07.2020
Springer
Springer Nature B.V
Subjects
Convexity
Corporations
Cost function
Economic aspects
Finance
Financial markets
Investment analysis
Mathematics
Mathematics and Statistics
Optimization
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Summary:This paper studies the form of the instantaneous impact cost function in a financial market with transaction costs via an axiomatic approach. We show that several kinds of convexity of the cost function are equivalent to the corresponding properties of the price impact functions. The results clarify the implicit assumptions made when selecting a particular form of the cost function and can be used when choosing the correct portfolio optimization framework.
ISSN:1072-3374
1573-8795
DOI:10.1007/s10958-020-04861-7