Codice  QDD 144 
Titolo  Portfolio Optimization over a Finite Horizon with Fixed and Proportional Transaction Costs and Liquidity Constraints 
Data  20130115 
Autore/i  Baccarin, S.; Marazzina, D. 
Link  Download full text 
Abstract  We investigate a portfolio optimization problem for an agent who invests in two assets, a riskfree and a risky asset modeled by a geometric Brownian motion. The investor faces both fixed and proportional transaction costs and liquidity constraints. His objective is to maximize the expected utility
from the portfolio liquidation at a terminal finite horizon. The model is formulated as a parabolic impulse control problem and we characterize the value function as the unique constrained viscosity solution of the associated quasivariational inequality. We compute numerically the optimal
policy by a an iterative finite element discretization technique, presenting extended numerical results in the case of a constant relative risk aversion utility function. Our results show that, even with small transaction costs and distant horizons, the optimal strategy is essentially a buyandhold trading strategy where the agent recalibrates his portfolio very few times. This contrasts sharply with the continuous interventions of the Merton s model without transaction costs. 
