Research on Investment-Consumption Problem with Proportional Transaction Costs

Author

Guo, Fu-hua ; Deng, Fei-qi

Author_Institution

Inst. of Syst. Eng., South China Univ. of Technol., Guangzhou

fYear

2006

fDate

13-16 Aug. 2006

Firstpage

764

Lastpage

769

Abstract

Investment consumption problem with proportional transaction costs is researched in this paper by the method of non-singular stochastic optimal control. It is easy to obtain buying, selling and no transaction regions in the solvency region and corresponding optimal buying, selling and consumption policies, because the expressions of the optimization problem obtained from this method is quadratic. Optimal buying, selling and consumption policies are obtained explicitly in this paper, since the investor´s utility is homothetic

Keywords

costing; investment; optimal control; optimisation; stochastic systems; investment-consumption problem; nonsingular stochastic optimal control; optimization problem; proportional transaction cost; trading policy; trading region; Cost function; Cybernetics; Differential equations; Investments; Machine learning; Optimal control; Optimization methods; Portfolios; Stochastic processes; Stochastic systems; Systems engineering and theory; Utility theory; Investment-consumption; Trading policies; Trading regions; Transaction costs;

fLanguage

English

Publisher

ieee

Conference_Titel

Machine Learning and Cybernetics, 2006 International Conference on

Conference_Location

Dalian, China

Print_ISBN

1-4244-0061-9

Type

conf

DOI

10.1109/ICMLC.2006.258450

Filename

4028165