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Optimal consumption policies in illiquid markets

Abstract : We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an important consequence, we can prove the existence of the optimal control (portfolio/consumption strategy) which we characterize both in feedback form in terms of the derivatives of the value functions and as the solution of a second-order ODE. Finally, numerical illustrations of the behavior of optimal consumption strategies between two trading dates are given.
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Preprints, Working Papers, ...
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Contributor : Peter Tankov <>
Submitted on : Wednesday, July 2, 2008 - 1:03:27 PM
Last modification on : Wednesday, December 9, 2020 - 3:14:59 PM
Long-term archiving on: : Friday, May 28, 2010 - 11:04:47 PM


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  • HAL Id : hal-00292673, version 1
  • ARXIV : 0807.0326


Alessandra Cretarola, Fausto Gozzi, Huyên Pham, Peter Tankov. Optimal consumption policies in illiquid markets. 2008. ⟨hal-00292673⟩



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