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L\'{e}vy Process, Proportional Transaction Costs and Foreign Exchange

Obonye Doctor, Elias R. Offen and Edward M. Lungu

Journal of Mathematics Research, 2017, vol. 9, issue 5, 133-141

Abstract: We analyse optimal portfolio selection problem of maximizing the utility of an agent who invests in a stock and money market account in the presence of proportional transaction cost $\lambda>0$ and foreign exchange rate. The stock price follows a (generalized) Geometric It\^{o}-L\'{e}vy process. The utility function is $U(c)={c^{p}}/{p}$ for all $c\geq0$, $p

Keywords: It\^{o}-L\'{e}vy diffusions; Portfolio optimization; foreign exchange; stochastic control; utility functions (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:ibn:jmrjnl:v:9:y:2017:i:5:p:133