Viscosity Solutions to Optimal Portfolio AllocationProblems in Models with Random Time Changes andTransaction Costs

We consider a risky asset whose instantaneous rate of returntakes two dierent values and changes from one to the other one at randomtimes which are neither known, nor directly observable. We study the optimalallocation strategy of traders who, in the presence of cost of transactions, investin this risky asset or in a non risky asset according to their belief on the currentstate of the instantaneous rate of return.[...]

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Year of publication:	2009-06-01
Authors:	Blanchet-Scalliet, Christophette ; Gibson Brandon, Rajna ; de Saporta, Benoîte ; Talay, Denis ; Tanré, Etienne
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Transaktionskosten \| Hamilton-Jacobi-Differentialgleichung \| Hamilton-Jacobi-Differential Equation

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1 Introduction
2 Description of the Model and Notation
2.1 Our main result
3 Preliminary estimates
4 Continuity of the Value Functions
5 The Dynamic Programming Principle
6 Existence of a viscosity solution
6.1 Existence of a viscosity upper solution
6.2 Existence of a viscosity lower solution
7 Uniqueness of the Viscosity Solution
7.1 Logarithmic utility function
7.2 Utility function in the class U
8 Numerical illustrations
8.1 Numerical scheme
8.2 Approximate value function
8.3 Efficient strategy
8.4 Misspecications
Acknowledgement
References

Persistent link: https://www.econbiz.de/10005868709