Finite-horizon optimal investment with transaction costs: construction of the optimal strategies (Q2274224)

The authors consider the problem of maximising expected utility of terminal wealth in a Black-Scholes market with proportional transaction costs. The value function of this problem is the unique viscosity solution of the Hamilton-Jacobi-Bellman equation. The Hamilton-Jacobi-Bellman equation admits a classical solution on a reduced state space. Using a verification procedure based on superharmonic functions, the authors establish the coincidence of value function of considered problem and a classical solution of the Hamilton-Jacobi-Bellman equation. The optimal strategies are constructed and a detailed analysis of the regularity of the value function is provided.