L´evy Process, Proportional Transaction Costs and Foreign Exchange - Research Portal

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L´evy Process, Proportional Transaction Costs and Foreign Exchange

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Offen, Elias (Mathematics)

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Author list: Obonye Doctor, Elias R. Offen & Edward M. Lungu

Publication year: 2017

Volume number: 9

Issue number: 5

Start page: 133

End page: 141

Number of pages: 9

URL: https://doi.org/10.5539/jmr.v9n5p133

We analyse optimal portfolio selection problem of maximizing the utility of an agent who invests in a stock and money market account in the presence of proportional transaction cost λ > 0 and foreign exchange rate. The stock price follows a (generalized) Geometric Itˆo-L´evy process. The utility function is U(c) = cp/p for all c ≥ 0, p < 1, p 0.

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