I am looking for papers that would describe asset allocation with geometry, group theory, markov chains or things like that. Keeping asset allocation in a range is easy but to keep it more precisely is harder. I find it often hard to judge things such as evaluation of trading costs and cause-effect -relationship (particularly when the relationships are long).
Here are some phases or states which I would like to control better:
- Cash is liquid which can change to any other asset with 2 phase: holding cash and buy another asset.
- The change of a fund requires that you sell it first to cash and then to your indented fund -- 3 phase.
- Changing fund to the better, 3phase but too expensive better to keep the old.
- much more phases!
Reference material appreciated.