Optimal consumption and investment with fixed and proportional transaction costs

Albert Altarovici, Max Reppen, H. Mete Soner

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)1673-1710
Number of pages38
JournalSIAM Journal on Control and Optimization
Volume55
Issue number3
DOIs
StatePublished - Jan 1 2017
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Control and Optimization
  • Applied Mathematics

Keywords

  • Dynamic Programming
  • Fixed Costs
  • Merton Problem
  • Transaction Costs
  • Viscosity Solutions

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