Multi-Period Portfolio Management and a Simple Method for Calculating the Realized Return with Transaction Costs

Abstract

In this work the authors provide a detailed analysis of multi-period portfolio transactions with transaction costs under a fixed and finite investment horizon. It is assumed that changes in asset prices occur only at discrete instants of time. The authors propose a simple method for calculating the realized return of multi-period portfolio transactions with transaction costs. This method is based on the so-called temporary decomposition of the transaction and on the detailed analysis of the history of all opened positions.