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Abstract
The current tools and approaches to transition management are biased towards either minimizing transaction costs or minimizing risk, but do not appropriately integrate both. This can lead to sub-par results, exposure to unintended risks and costs, and lingering doubts about whether the right decisions were made. This article shows that risk and cost do not have to be a trade-off. The multiperiod optimization (MPO) solution, which simultaneously addresses cumulative transition-period transaction costs and cumulative transition-period portfolio risks, produces a superior transition trade strategy and ensures that both the investor and the transition manager clearly understand the actual risks and costs during the transition period.
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