Lifetime investment and consumption with recursive preferences and small transaction costs

Yaroslav Melnyk, Johannes Muhle‐Karbe and Frank Thomas Seifried

Mathematical Finance, 2020, vol. 30, issue 3, 1135-1167

Abstract: We investigate the effects of small proportional transaction costs on lifetime consumption and portfolio choice. The extant literature has focused on agents with additive utilities. Here, we extend this analysis to the archetype of nonadditive preferences: the isoelastic recursive utilities proposed by Epstein and Zin.

Date: 2020
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