In this talk we study the problem of optimal portfolio choice with permanent and temporary transaction costs. In a general Markovian model the objective of the agent is to maximise the discounted value of the future excess return penalised for risk. We establish an expansion of the value function of this problem when the transaction costs go to zero . We obtain a characterisation of the asymptotically optimal portfolio.

This is a joint work in progress with Johannes Muhle-Karbe. Speaker(s): Ibrahim Ekren (ETH)