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Consumption-investment optimization problem in a Lévy financial model with transaction Costs

Lépinette, Emmanuel; Tran, Tuan Quoc (2020), Consumption-investment optimization problem in a Lévy financial model with transaction Costs, Mathematics and Financial Economics. 10.1007/s11579-020-00260-3

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Type
Article accepté pour publication ou publié
Date
2020
Journal name
Mathematics and Financial Economics
Publisher
Springer
Publication identifier
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Author(s)
Lépinette, Emmanuel
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Tran, Tuan Quoc
Laboratoire de Génie Electrique de Grenoble [G2ELab]
Abstract (EN)
We consider the consumption-investment optimization problem for the financial market model with constant proportional transaction rates and Lévy price process dynamics. Contrarily to the recent work in [4], portfolio process trajectories are only left and right limited. This allows us to identify an optimal làdlàg strategy, e.g. in the two dimensional case, as it is possible to suitably rebalance the portfolio processes when they jump outside the no trade region of the solvency cone.
Subjects / Keywords
Consumption-investment Problem; Lévy process; Viscosity solution; Hamilton-Jacobi-Bellman equation; Transaction costs ·
JEL
G11 - Portfolio Choice; Investment Decisions
G13 - Contingent Pricing; Futures Pricing