Optimal consumption and investment with fixed and proportional transaction costs

DOI10.1137/15M1053633zbMATH Open1372.49031arXiv1610.03958MaRDI QIDQ5266527FDOQ5266527

Authors: Albert Altarovici, Max Reppen, H. Mete Soner 

Publication date: 7 June 2017

Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)

Abstract: The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming is proved in the general setting and a comparison result for possibly discontinuous viscosity solutions of the dynamic programming equation is provided. Detailed numerical experiments illustrate several properties of the optimal investment strategies.

Full work available at URL: https://arxiv.org/abs/1610.03958

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zbMATH Keywords

constrained viscosity solutiontransaction costsvalue functionnumerical simulationsfixed costssub-solutionsuper-solutionMerton problemdynamic programming equation (DPE)

Mathematics Subject Classification ID

Portfolio theory (91G10) Dynamic programming in optimal control and differential games (49L20) Viscosity solutions to Hamilton-Jacobi equations in optimal control and differential games (49L25) Discrete approximations in optimal control (49M25) Existence theories for free problems in two or more independent variables (49J10)

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