Portfolio Selection with Transaction Costs

@article{Davis1990PortfolioSW,
  title={Portfolio Selection with Transaction Costs},
  author={M. A. Davis and A. Norman},
  journal={Math. Oper. Res.},
  year={1990},
  volume={15},
  pages={676-713}
}
In this paper, optimal consumption and investment decisions are studied for an investor who has available a bank account paying a fixed rate of interest and a stock whose price is a log-normal diffusion. This problem was solved by Merton and others when transactions between bank and stock are costless. Here we suppose that there are charges on all transactions equal to a fixed percentage of the amount transacted. It is shown that the optimal buying and selling policies are the local times of… Expand
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