Optimal Investment and Consumption Strategies with General Cost Structure under CRRA Utility (opens in new tab)

Transaction costs play a critical role in portfolio allocation and consumption decisions. We study a finite-horizon consumption--investment problem with CRRA utility under a general class of transaction cost functions. Based on dynamic programming and a singular perturbation expansion for a small cost-to-wealth ratio, we derive leading-order asymptotic formulas for the no-trade region, the four trading boundaries, the value function correcti...