The Dynamic Programming Equation for the Problem of Optimal Investment Under Capital Gains Taxes

Imen Ben Tahar (imen@ceremade.dauphine.fr), Nizar Touzi and Mete Soner (hmsoner@ethz.ch)
Additional contact information
Imen Ben Tahar: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Nizar Touzi: CMAP - Centre de Mathématiques Appliquées de l'Ecole polytechnique - Inria - Institut National de Recherche en Informatique et en Automatique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Mete Soner: D-MATH - Department of Mathematics [ETH Zurich] - ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

Post-Print from HAL

Abstract: This paper considers an extension of the Merton optimal investment problem to the case where the risky asset is subject to transaction costs and capital gains taxes. We derive the dynamic programming equation in the sense of constrained viscosity solutions. We next introduce a family of functions $(V_\varepsilon)_{\varepsilon>0}$, which converges to our value function uniformly on compact subsets, and which is characterized as the unique constrained viscosity solution of an approximation of our dynamic programming equation.

Keywords: optimal consumption and investment in continuous time; transaction costs; capital gains taxes; viscosity solutions (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in SIAM Journal on Control and Optimization, 2007, 46 (5), pp.1779-1801. ⟨10.1137/050646044⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-00703103

DOI: 10.1137/050646044

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).