Journal of the
Korean Mathematical Society JKMS

ISSN(Print) 0304-9914 ISSN(Online) 2234-3008
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J. Korean Math. Soc. 2007; 44(1): 139-150

Printed January 1, 2007

Copyright © The Korean Mathematical Society.

Optimal portfolio selection with transaction costs when an illiquid asset pays cash dividends

Bong-Gyu Jang

Financial Supervisory Service

Abstract

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We investigate an optimal portfolio selection problem with transaction costs when an illiquid asset pays cash dividends and there are constraints on the illiquid asset holding. We provide closed form solutions for the problem, and by using these solutions we illustrate interesting features of optimal policies.

Keywords: optimal portfolio, consumption, investment, dividend, transaction costs

MSC numbers: Primary 91B28, 90C39

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