Finite-horizon optimal investment with transaction costs: construction of the optimal strategies

Christoph Belak () and Jörn Sass ()
Additional contact information
Christoph Belak: Technische Universität Berlin
Jörn Sass: University of Kaiserslautern

Finance and Stochastics, 2019, vol. 23, issue 4, No 3, 888 pages

Abstract: Abstract We revisit the problem of maximising expected utility of terminal wealth in a Black–Scholes market with proportional transaction costs. While it is known that the value function of this problem is the unique viscosity solution of the HJB equation and that the HJB equation admits a classical solution on a reduced state space, it has been an open problem to verify that these two coincide. We establish this result by devising a verification procedure based on superharmonic functions. In the process, we construct optimal strategies and provide a detailed analysis of the regularity of the value function.

Keywords: Utility maximisation; Transaction costs; Reflected diffusions; Superharmonic functions; 93E20; 35R35; 91G80 (search for similar items in EconPapers)
JEL-codes: C61 G11 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00780-019-00404-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:23:y:2019:i:4:d:10.1007_s00780-019-00404-4

Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2

DOI: 10.1007/s00780-019-00404-4

Access Statistics for this article

Finance and Stochastics is currently edited by M. Schweizer

More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().