• Merton’s Type Portfolio Optimization Problem in Finite-Horizon Case with HARA Utility Function and Proportional Transaction costs, Explicit Solution

Dorj Nyamsuren*, Tserendorj Batsukh

Abstract


A Merton’s type portfolio optimization problem with HARA utility function and transaction costs in finite-horizon case is considered in this paper. One case for a particular class of utility and bequest function of the Merton’s problem of an investor has been solved analytically.

Keywords


Transaction costs, Stochastic differential equation, Ito lemma, Bellman principles, Hamilton-Jacobi-Bellman equation, Brownian motion, Expected utility function, hyperbolic absolute risk aversion (HARA).

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