Asymptotic Analysis for Optimal Investment in Finite Time with Transaction Costs
AbstractWe consider an agent who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of a proportional transaction cost. The utility function considered is power utility. We provide a heuristic and a rigorous derivation of the asymptotic expansion of the value function in powers of transaction cost parameter. We also obtain a "nearly optimal" strategy, whose utility asymptotically matches the leading terms in the value function.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1112.2749.
Date of creation: Dec 2011
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
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- George M. Constantinides & Thaleia Zariphopoulou, .
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CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago
347, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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