Title: Rebalancingof Leveraged ETFs under Market Frictions

Speaker: Dr Chen YANG  Department of Mathematics, ETH Zürich

Date: Nov 15, 2018, Thursday, 4:00pm-4:45pm

Venue: 览秀楼105

Abstract:

We study how to do the daily rebalancingof Leveraged ETFs, in a comprehensive setting including overnight jump risk, aninfinite horizon, and market frictions. Compared to existing strategies, theoptimal rebalance strategy leads to a lower slippage and smoother tradingpattern. The optimal strategy satisfies the principle of “aiming in front oftarget” introduced in Garleanu and Pedersen (2013, Journal of Finance).Furthermore, we obtain an analytical solution for the optimal strategy in termsof a system of ordinary differential equations.

Thisis a joint work with Min Dai, Steven Kou and Mete Soner