| Abstract: |
| In this talk, I will report some recent progress on the portfolio optimization problem featuring proportional transaction costs under the Epstein-Zin stochastic differential utility preference. A key and novel idea is to parametrise consumption and the value function in terms of the ``shadow fraction of wealth``, which leads to a simpler first order free boundary problem. This facilitates the analysis of aspects of the problem that have previously been challenging such as well-posedness, comparative statics, and cases beyond the small transaction cost regime. An extension to dividend-paying risky asset will be discussed. |
|