Please use this identifier to cite or link to this item:
Title: Finite-horizon optimal investment with transaction costs: A parabolic double obstacle problem
Authors: Dai, M. 
Yi, F.
Keywords: Double obstacle problem
Finite horizon
Free boundary
Optimal investment
Portfolio selection
Singular stochastic control
Transaction costs
Issue Date: 15-Feb-2009
Source: Dai, M., Yi, F. (2009-02-15). Finite-horizon optimal investment with transaction costs: A parabolic double obstacle problem. Journal of Differential Equations 246 (4) : 1445-1469. ScholarBank@NUS Repository.
Abstract: This paper concerns optimal investment problem of a CRRA investor who faces proportional transaction costs and finite time horizon. From the angle of stochastic control, it is a singular control problem, whose value function is governed by a time-dependent HJB equation with gradient constraints. We reveal that the problem is equivalent to a parabolic double obstacle problem involving two free boundaries that correspond to the optimal buying and selling policies. This enables us to make use of the well-developed theory of obstacle problem to attack the problem. The C2, 1 regularity of the value function is proven and the behaviors of the free boundaries are completely characterized. © 2008 Elsevier Inc. All rights reserved.
Source Title: Journal of Differential Equations
ISSN: 00220396
DOI: 10.1016/j.jde.2008.11.003
Appears in Collections:Staff Publications

Show full item record
Files in This Item:
There are no files associated with this item.


checked on Mar 7, 2018


checked on Feb 5, 2018

Page view(s)

checked on Mar 11, 2018

Google ScholarTM



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.