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SUMMARY:Portfolio Optimization with Recursive Utility under Small Transact
 ion Costs
DTSTART:20151124T120000
DTEND:20151124T130000
DTSTAMP:20260502T203146Z
UID:2773897f8119ddf28bf0810e7c23dbf0dd557eee2e30b1d180a3004f
CATEGORIES:Conferences - Seminars
DESCRIPTION:Yaroslav MELNYK (Postdoc\, SFI@EPFL)\nWe investigate the portf
 olio problem of an investor with Epstein-Zin recursive utility under propo
 rtional transaction costs. We characterize the solution via variational in
 equalities and prove existence of classical solutions for small cost param
 eters. We also provide a suitable verification theorem. This allows us to 
 derive rigorous asymptotic expansions for optimal no-trade regions and con
 sumption strategies and to investigate the effects of the investor's relat
 ive risk aversion and the elasticity of intertemporal substituion (EIS) $\
 \psi$ on the optimal strategies. Our main findings are: (a) At the leading
  order\, the no-trade region is the same as with additive expected utility
 \; in particular\, it is determined solely by the relative risk aversion. 
 The no-trade region depends on the investor's EIS only at the next-to-lead
 ing order\, and only indirectly thought the frictionless optimal consumpti
 on rate. (b) The investor's optimal consumption depends on his EIS also at
  the leading order. The consumption-wealth ratio is higher than in the fri
 ctionless case if and only if $\\psi>1$.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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