Optimal investment with taxes: An existence result (Q1567186)

A consumption-investment problem of the following form is considered in the continuous time framework. The agent receives an income, rebalances her portfolio, and consumes the rest (non-negative consumption is assumed). Tax has to be paid on benefits and the sales may be submitted to a FIFO priority rule imposed by the tax administration. Short selling is not allowed. Agent's utility function is given and it should be maximized over all admissible strategies. This problem turns out to be a non-classical optimal control problem with endogeneous delay with a complex non-negativity constraint on consumption. The paper contains existence results.