Asymptotic analysis for optimal investment and consumption with transaction costs

@article{Janecek2004AsymptoticAF,
  title={Asymptotic analysis for optimal investment and consumption with transaction costs},
  author={Karel Janecek and Steven E. Shreve},
  journal={Finance and Stochastics},
  year={2004},
  volume={8},
  pages={181-206}
}
We consider an agent who seeks to optimally invest and consume in the presence of proportional transaction costs. The agent can invest in two types of futures contracts, modeled as two correlated arithmetic Brownian motions, and in a money market account with constant rate of interest. She may also consume and get utility U(c) 4 = c p p , c ≥ 0, where p ∈ (0, 1) and c is the rate of consumption. The agent can control the rate of consumption and influence the evolution of wealth by controlling… CONTINUE READING
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