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Consumption-investment optimization problem in a Lévy financial model with transaction Costs and ladle strategies

Author

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  • Emmanuel Lépinette

    (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)

  • Tuan Q. Tran

    (Ryerson University [Toronto])

Abstract

We consider the consumption-investment optimization problem for the financial market model with constant proportional transaction rates and Lévy price process dynamics. Contrarily to the recent work in [4], portfolio process trajectories are only left and right limited. This allows us to identify an optimal làdlàg strategy, e.g. in the two dimensional case, as it is possible to suitably rebalance the portfolio processes when they jump outside the no trade region of the solvency cone.

Suggested Citation

  • Emmanuel Lépinette & Tuan Q. Tran, 2020. "Consumption-investment optimization problem in a Lévy financial model with transaction Costs and ladle strategies," Post-Print hal-01103070, HAL.
    • Handle: RePEc:hal:journl:hal-01103070
    DOI: 10.1007/s11579-020-00260-3
    Note: View the original document on HAL open archive server: https://hal.science/hal-01103070
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    References listed on IDEAS

    as
    1. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
    2. Framstad, Nils Chr. & Oksendal, Bernt & Sulem, Agnes, 2001. "Optimal consumption and portfolio in a jump diffusion market with proportional transaction costs," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 233-257, April.
    3. M. H. A. Davis & A. R. Norman, 1990. "Portfolio Selection with Transaction Costs," Mathematics of Operations Research, INFORMS, vol. 15(4), pages 676-713, November.
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