Milang Journal of Mathematics and Its Applications
Vol. 2 No. 1 (2003): Journal of Mathematics and Its Applications

AN OPTIMAL CONTROL FORMULATION OF PORTFOLIO SELECTION PROBLEM WITH BULLET TRANSACTION COST

E. SYAHRIL (Bogor Agricultural University)

Article Info

Publish Date
01 Jul 2003

Abstract

This paper formulates a consumption and investment decision problem for an individual who has available a riskless asset paying fixed interest rate and a risky asset driven by Brownian mo- tion price fluctuations. The individual is supposed to observe his or her current wealth only, when making transactions, that trans- actions incur costs, and that decisions to transact can be made at any time based on all current information. The transactions costs is fixed for every transaction, regardless of amount trans- acted. In addition, the investor is charged a fixed fraction of total wealth as management fee. The investor’s objective is to max- imize the expected utility of consumption over a given horizon. The problem faced by the investor is formulated into a stochastic discrete-continuous-time control problem.

Copyrights © 2003




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Journal Info
Milang Journal of Mathematics and Its Applications
Website

Abbrev

jmap

Publisher

Institut Pertanian Bogor

Subject

Agriculture, Biological Sciences & Forestry Computer Science & IT Control & Systems Engineering Earth & Planetary Sciences Mathematics

Description

The name MILANG is a Sundanese word that means “to count”, and is also an acronym of the topics covered in the journal: Mathematics in Informatics, Life Sciences, Actuarial Science, Natural Sciences, and Graph ...