| Article ID: | iaor20121900 |
| Volume: | 218 |
| Issue: | 12 |
| Start Page Number: | 6887 |
| End Page Number: | 6898 |
| Publication Date: | Feb 2012 |
| Journal: | Applied Mathematics and Computation |
| Authors: | Castellano Rosella, Cerqueti Roy |
| Keywords: | finance & banking, optimization, stochastic processes, programming: dynamic |
This paper addresses the optimal consumption/investment problem in a mixed discrete/continuous time model in presence of rarely traded stocks. Stochastic control theory with state variable driven by a jump‐diffusion, via dynamic programming, is used. The theoretical study is validated through numerical experiments, and the proposed model is compared with the classical Merton’s portfolio. Some financial insights are provided.