The Optimal Strategy of Consumption and Investment with Proportinal Transaction Costs and Multiple Risky Assets

The introduction of transaction costs adds ment Strategy problem. In the presence of transaction considerable complexity to the optimal Consumption and Investcosts, the stock is only traded infrequently. Policies for optimizing portfolios with multiple risky assets have received relatively less attention. This paper studies thve optimal Consumption and Investment Strategy for a HARA investor who faces proportional transaction costs and maximizes expected utility of finite/or infinite horizon. Multiple risky assets can be trading. Using the concavity and the homothetic property of the value function, the HJB can be reduced from a PDE to an ODE. The analytic forms of the value functions in the transaction regions are achieved and HJB equation which the value function must be satisfied with in the NT regions is given.