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Reports (Research Report) Year : 1999

Optimal Consumption and Portfolio in a Jump Diffusion Market with Proportional Transaction Costs

Nils Chr. Framstad
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Bernt Oksendal
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Abstract

We study the optimal consumption and portfolio in a jump diffusion market with proportional transaction costs. We show that the solution in the jump diffusion case has the same form as in the pure diffusion case; in particular, (under some assumptions) there is a transaction cone D such that it is optimal to make no transactions as long as the wealth position remains in D and to sell/buy stocks according to local time on the boundary of D. The associated integro-differential variational inequality is studied by using the theory of viscosity solutions.
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Dates and versions

inria-00072913 , version 1 (24-05-2006)

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  • HAL Id : inria-00072913 , version 1

Cite

Nils Chr. Framstad, Bernt Oksendal, Agnès Sulem. Optimal Consumption and Portfolio in a Jump Diffusion Market with Proportional Transaction Costs. [Research Report] RR-3749, INRIA. 1999. ⟨inria-00072913⟩
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