IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01103070.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://hal.science/hal-01103070/document
    Download Restriction: no
    File URL: https://libkey.io/10.1007/s11579-020-00260-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jouini, Elyes, 2001. "Arbitrage and control problems in finance: A presentation," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 167-183, April.
    2. Valeri Zakamouline, 2004. "A Unified Approach to Portfolio Optimization with Linear Transaction Costs," GE, Growth, Math methods 0404003, University Library of Munich, Germany, revised 28 Apr 2004.
    3. Dai, Min & Wang, Hefei & Yang, Zhou, 2012. "Leverage management in a bull–bear switching market," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1585-1599.
    4. Valeri Zakamouline, 2005. "A unified approach to portfolio optimization with linear transaction costs," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 62(2), pages 319-343, November.
    5. Dimitri Vallière & Yuri Kabanov & Emmanuel Lépinette, 2016. "Consumption-investment problem with transaction costs for Lévy-driven price processes," Finance and Stochastics, Springer, vol. 20(3), pages 705-740, July.
    6. Michal Czerwonko & Stylianos Perrakis, 2016. "Portfolio Selection with Transaction Costs and Jump-Diffusion Asset Dynamics I: A Numerical Solution," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 1-23, December.
    7. Hong Liu & Mark Loewenstein, 2013. "Market Crashes, Correlated Illiquidity, and Portfolio Choice," Management Science, INFORMS, vol. 59(3), pages 715-732, October.
    8. repec:dau:papers:123456789/5590 is not listed on IDEAS
    9. Bjork, Tomas, 2009. "Arbitrage Theory in Continuous Time," OUP Catalogue, Oxford University Press, edition 3, number 9780199574742.
    10. Marcos Escobar-Anel & Michel Kschonnek & Rudi Zagst, 2022. "Portfolio optimization: not necessarily concave utility and constraints on wealth and allocation," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 95(1), pages 101-140, February.
    11. Xinfu Chen & Min Dai & Wei Jiang & Cong Qin, 2022. "Asymptotic analysis of long‐term investment with two illiquid and correlated assets," Mathematical Finance, Wiley Blackwell, vol. 32(4), pages 1133-1169, October.
    12. Baojun Bian & Xinfu Chen & Min Dai & Shuaijie Qian, 2021. "Penalty method for portfolio selection with capital gains tax," Mathematical Finance, Wiley Blackwell, vol. 31(3), pages 1013-1055, July.
    13. Koichi Matsumoto, 2007. "Portfolio Insurance with Liquidity Risk," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 14(4), pages 363-386, December.
    14. Luitgard Veraart, 2010. "Optimal Market Making in the Foreign Exchange Market," Applied Mathematical Finance, Taylor & Francis Journals, vol. 17(4), pages 359-372.
    15. Zuo Quan Xu & Fahuai Yi, 2014. "An Optimal Consumption-Investment Model with Constraint on Consumption," Papers 1404.7698, arXiv.org.
    16. Milevsky, Moshe A. & Young, Virginia R., 2007. "Annuitization and asset allocation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 3138-3177, September.
    17. Davi Valladão & Thuener Silva & Marcus Poggi, 2019. "Time-consistent risk-constrained dynamic portfolio optimization with transactional costs and time-dependent returns," Annals of Operations Research, Springer, vol. 282(1), pages 379-405, November.
    18. repec:cte:wsrepe:ws1521 is not listed on IDEAS
    19. Chellathurai, Thamayanthi & Draviam, Thangaraj, 2007. "Dynamic portfolio selection with fixed and/or proportional transaction costs using non-singular stochastic optimal control theory," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2168-2195, July.
    20. Johannes Muhle-Karbe & Max Reppen & H. Mete Soner, 2016. "A Primer on Portfolio Choice with Small Transaction Costs," Papers 1612.01302, arXiv.org, revised May 2017.
    21. Felix J. Lopez-Iturriaga & Domingo Javier Santana-Martin, 2015. "Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact On Dividend Policy," HSE Working papers WP BRP 41/FE/2015, National Research University Higher School of Economics.
    22. Haluk Yener, 2015. "Maximizing survival, growth and goal reaching under borrowing constraints," Quantitative Finance, Taylor & Francis Journals, vol. 15(12), pages 2053-2065, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01103070. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.