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A geometric approach to portfolio optimization in models with transaction costs

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Author Info

  • Yuri Kabanov

    ()

  • Claudia Klüppelberg

    ()

Abstract

We consider a continuous-time stochastic optimization problem with infinite horizon, linear dynamics, and cone constraints which includes as a particular case portfolio selection problems under transaction costs for models of stock and currency markets. Using an appropriate geometric formalism we show that the Bellman function is the unique viscosity solution of a HJB equation. Copyright Springer-Verlag Berlin/Heidelberg 2004

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File URL: http://hdl.handle.net/10.1007/s00780-003-0114-3
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Bibliographic Info

Article provided by Springer in its journal Finance and Stochastics.

Volume (Year): 8 (2004)
Issue (Month): 2 (05)
Pages: 207-227

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Handle: RePEc:spr:finsto:v:8:y:2004:i:2:p:207-227

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Web page: http://www.springerlink.com/content/101164/

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Related research

Keywords: Currency market; transaction costs; consumption-investment problem; utility function; HJB equation; viscosity solution;

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Cited by:
  1. Erhan Bayraktar & Yuchong Zhang, 2014. "Stochastic Perron's Method for the Probability of lifetime ruin problem under transaction costs," Papers 1404.7406, arXiv.org.
  2. S\"oren Christensen & Marc Wittlinger, 2012. "Optimal relaxed portfolio strategies for growth rate maximization problems with transaction costs," Papers 1209.0305, arXiv.org, revised Jun 2013.
  3. Bruno Bouchard & Elyès Jouini, 2010. "Transaction Costs in Financial Models," Post-Print halshs-00703138, HAL.
  4. Thomas Breuer & Martin Jandačka, 2008. "Portfolio selection with transaction costs under expected shortfall constraints," Computational Management Science, Springer, vol. 5(4), pages 305-316, October.

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