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 language | English (US) |
|---|---|
| Pages (from-to) | 1673-1710 |
| Number of pages | 38 |
| Journal | SIAM Journal on Control and Optimization |
| Volume | 55 |
| Issue number | 3 |
| DOIs | |
| State | Published - 2017 |
| Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Control and Optimization
- Applied Mathematics
Keywords
- Dynamic Programming
- Fixed Costs
- Merton Problem
- Transaction Costs
- Viscosity Solutions