Geodesic
Discrete time risk sensitive portfolio optimization with consumption and proportional transaction costs
Łukasz Stettner1
1 Institute of Mathematics Polish Academy of Sciences Śniadeckich 8 00-956 Warszawa, Poland
Applicationes Mathematicae, Tome 32 (2005) no. 4, pp. 395-404.

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Risk sensitive and risk neutral long run portfolio problems with consumption and proportional transaction costs are studied. Existence of solutions to suitable Bellman equations is shown. The asymptotics of the risk sensitive cost when the risk factor converges to $0$ is then considered. It turns out that optimal strategies are stationary functions of the portfolio (portions of the wealth invested in assets) and of economic factors. Furthermore an optimal portfolio strategy for a risk neutral control problem is nearly optimal for a risk sensitive portfolio cost functional with risk factor close to $0$.
DOI : 10.4064/am32-4-3
Keywords: risk sensitive risk neutral long run portfolio problems consumption proportional transaction costs studied existence solutions suitable bellman equations shown asymptotics risk sensitive cost risk factor converges considered turns out optimal strategies stationary functions portfolio portions wealth invested assets economic factors furthermore optimal portfolio strategy risk neutral control problem nearly optimal risk sensitive portfolio cost functional risk factor close

Łukasz Stettner 1

1 Institute of Mathematics Polish Academy of Sciences Śniadeckich 8 00-956 Warszawa, Poland 
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 optimization with consumption and
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 optimization with consumption and
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Łukasz Stettner. Discrete time risk sensitive portfolio
 optimization with consumption and
 proportional transaction costs. Applicationes Mathematicae, Tome 32 (2005) no. 4, pp. 395-404. doi : 10.4064/am32-4-3. http://geodesic.mathdoc.fr/articles/10.4064/am32-4-3/

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