Abstract
Consider an investor who has the following instruments available to him: a bank account paying a fixed rate of interest r and n risky assets (“stocks”) whose prices are modeled as geometric Brownian motions. The investor is allowed to consume at a rate c(t) from the bank account and is subject to the constraint that he remain solvent at all times. Any trading in the stocks must be self-financing, and incurs a transaction cost which is proportional to the amount being traded. The investor’s objective is to maximize his expected discounted utility of lifetime consumption.
The original version of this chapter was revised: The copyright line was incorrect. This has been corrected. The Erratum to this chapter is available at DOI: 10.1007/978-0-387-35359-3_40
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© 1999 IFIP International Federation for Information Processing
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Collings, P., Haussmann, U.G. (1999). Optimal Portfolio Selection with Transaction Costs. In: Chen, S., Li, X., Yong, J., Zhou, X.Y. (eds) Control of Distributed Parameter and Stochastic Systems. IFIP Advances in Information and Communication Technology, vol 13. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-35359-3_23
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DOI: https://doi.org/10.1007/978-0-387-35359-3_23
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