Primal-dual methods for the computation of trading regions under proportional transaction costs

摘要

Portfolio optimization problems on a finite time horizon under proportional transaction costs are considered. The objective is to maximize the expected utility of the terminal wealth. The ensuing non-smooth time-dependent Hamilton–Jacobi–Bellman equation is solved by regularization and the application of a semi-smooth Newton method. Discretization in space is carried out by finite differences or finite elements. Computational results for one and two risky assets are provided.