Asymptotic analysis for Merton's problem with transaction costs in power utility case

DOI10.1080/17442508.2013.879142MaRDI QIDQ2811107zbMATH OpenOpenAlexFDO

Authors Jin Hyuk Choi

Publication date 10 June 2016

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1309.3721

zbMATH Keywords

asymptotic analysisstochastic controltransaction costsutility maximizationshadow price

Mathematics Subject Classification ID

Portfolio theory (91G10)

Abstract: We revisit the optimal investment and consumption problem with proportional transaction costs. We prove that both the value function and the slopes of the lines demarcating the no-trading region are analytic functions of cube root of the transaction cost parameter. Also, we can explicitly calculate the coefficients of the fractional power series expansions of the value function and the no-trading region.

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Cites work

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• Optimum consumption and portfolio rules in a continuous-time model
• Portfolio Selection with Transaction Costs
• Portfolio selection with transactions costs
• Shadow price in the power utility case

Cited in

(7)

• Asymptotics and duality for the Davis and Norman problem
• scientific article; zbMATH DE number 2133124 (Why is no real title available?)
• Optimal annuitization and asset allocation with fixed transaction costs
• Unified asymptotics for investment under illiquidity: transaction costs and search frictions
• Asymptotic analysis of optimal investment and consumption with transaction costs.
• Homogenization and asymptotics for small transaction costs
• Optimal investment in an illiquid market with search frictions and transaction costs

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