Optimal consumption and investment with transaction costs and multiple risky assets

Deskripsi

We consider the optimal intertemporal consumption and investment policy of a constant absolute risk aversion ( CARA ) investor who faces fixed and proportional transaction costs when trading multiple risky assets. We show that when asset returns are uncorrelated, the optimal investment policy is to keep the dollar amount invested in each risky asset between two constant levels and upon reaching either of these thresholds, to trade to the corresponding optimal targets..Printed Journal