Optimal consumption and portfolio in a jump diffusion market with proportional transaction costs (Q5939297)

The problem of optimal consumption and portfolio in a jump diffusion market in the presence of proportional transaction costs for an agent with constant relative risk aversion utility is considered. It is shown that the solution in the jump diffusion case has the same form as in the pure diffusion case. In particular, it is shown under some assumptions that there is no transaction cone in the \((x,y)\) plane such that it is optimal to make no transactions as long as the wealth position remains in the transaction cone and to sell or buy stocks according to local time on the boundary of the transaction cone.