2002（SCI）OPTIMAL CONSUMPTION AND PORTFOLIO WITH BOTH FIXED AND PROPORTIONAL TRANSACTION COSTS.pdfVIP

c SIAM J. CONTROL OPTIM. 2002 Society for Industrial and Applied Mathematics Vol. 40, No. 6, pp. 1765–1790 OPTIMAL CONSUMPTION AND PORTFOLIO WITH BOTH FIXED p AND PROPORTIONAL TRANSACTION COSTS∗ h p . a † ` ‡ s BERNT ØKSENDAL AND AGNES SULEM j o / s Abstract. We consider a market model with one risk-free and one risky asset, in which the l a dynamics of the risky asset are governed by a geometric Brownian motion. In this market we n r u consider an investor who consumes from the bank account and who has the opportunity at any time o j to transfer funds between the two assets. We suppose that these transfers involve a fixed transaction / g cost k 0, independent of the size of the transaction, plus a cost proportional to the size of the r o . transaction. m a The objective is to maximize the cumulative expected utility of consumption over a planning i s. horizon. We formulate this problem as a combined stochastic control/impulse control problem, which w in turn leads to a (nonlinear) quasi-variational Hamilton–Jacobi–Bellman inequality (QVHJBI). We w w prove that the value function is the unique viscosity solution of this QVHJBI. Finally, numerical / / results are presented. : p t t h Key words. portfolio selection, transaction cost, impulse control, quasi-variational inequalities, e e viscosity solutions s