Related papers: Modern Tontine with Transaction Costs
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
There is little disagreement among insurance actuaries and financial economists about the societal benefits of longevity-risk pooling in the form of life annuities, defined benefit pensions, self-annuitization funds, and even tontine…
We study an agent's lifecycle portfolio choice problem with stochastic labor income, borrowing constraints and a finite retirement date. Similarly to arXiv:2002.00201, wages evolve in a path-dependent way, but the presence of a finite…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We study optimal consumption and retirement using a Cobb-Douglas utility and a simple model in which an interesting bifurcation arises. With high wealth, individuals plan to retire. With low wealth they plan to never retire. At a critical…
We characterise the value function of the optimal dividend problem with a finite time horizon as the unique classical solution of a suitable Hamilton-Jacobi-Bellman equation. The optimal dividend strategy is realised by a Skorokhod…
This paper examines the retirement decision, optimal investment, and consumption strategies under an age-dependent force of mortality. We formulate the optimization problem as a combined stochastic control and optimal stopping problem with…
We apply stochastic Perron's method to a singular control problem where an individual targets at a given consumption rate, invests in a risky financial market in which trading is subject to proportional transaction costs, and seeks to…
This paper concerns the recursive utility maximization problem. We assume that the coefficients of the wealth equation and the recursive utility are concave. Then some interesting and important cases with nonlinear and nonsmooth…
We revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…
We consider a new approach to portfolio selection in presence of transaction costs which allows to map the problem into one without costs. The proposed approach connects all the quantities of interest to exit times and probabilities to…
In this study we propose a unified model of optimal retirement, consumption and portfolio choice of an individual agent, which encompasses a large class of the models in the literature and provide a general methodology to solve the model.…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
This paper extends the classical consumption and portfolio rules model in continuous time (Merton 1969, 1971) to the framework of decision-makers with time-inconsistent preferences. The model is solved for different utility functions for…
We consider Merton's problem with proportional transaction costs. It is well known that the optimal investment strategy is characterized by two trading boundaries, the buy boundary and the sell boundary, between which lies the no-trading…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
We present an expansion for portfolio optimization in the presence of small, instantaneous, quadratic transaction costs. Specifically, the magnitude of transaction costs has a coefficient that is of the order $\epsilon$ small, which leads…
The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the…