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 S. Shreve},
  journal={Finance and Stochastics},
  year={2004},
  volume={8},
  pages={181-206}
}
  • Karel Janecek, S. Shreve
  • Published 2004
  • Economics, Computer Science
  • Finance and Stochastics
  • Abstract.We consider an agent who invests in a stock and a money market and consumes in order to maximize the utility of consumption over an infinite planning horizon in the presence of a proportional transaction cost $\lambda > 0$. The utility function is of the form U(c) = c1-p/(1-p) for p > 0, $p\neq 1$. We provide a heuristic and a rigorous derivation of the asymptotic expansion of the value function in powers of $\lambda^{1/3}$, and we also obtain asymptotic results on the boundary of the… CONTINUE READING
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