A geometric approach to portfolio optimization in models with transaction costs (Q1887272)

From MaRDI portal
scientific article
Language Label Description Also known as
English
A geometric approach to portfolio optimization in models with transaction costs
scientific article

    Statements

    A geometric approach to portfolio optimization in models with transaction costs (English)
    0 references
    0 references
    0 references
    24 November 2004
    0 references
    This note is aimed to show that convex analysis provides a natural language to treat multi-asset investment-consumption models with transaction costs. Moreover, convex analysis allows to replace tedious computations by appealing to elementary geometric properties. The authors are looking for a compromise between generality and ``accessibility'' of results and restrict themselves to the framework which is adequate to cover a currency market model. The main results are assertions that the Bellman function is a viscosity solution of an HJB equation and that this equation has a unique solution. It is shown, in particular, that existence of the Lyapunov function together with the monotonicity of the dual of the utility function (with respect to the partial ordering induced by the dual to the solvency cone) are the only properties needed to guarantee the existence result.
    0 references
    currency market
    0 references
    transaction costs
    0 references
    consumption-investment problem
    0 references
    utility function
    0 references
    HJB equation
    0 references
    viscosity solution
    0 references

    Identifiers