Homogenization and asymptotics for small transaction costs: the multidimensional case

Abstract

In the context of the multi-dimensional infinite horizon optimal consumption-investment problem with proportional transaction costs, we provide the first order expansion in small transact costs. Similar to the one-dimensional derivation in our accompanying paper [42], the asymptotic expansion is expressed in terms of a singular ergodic control problem, and our arguments are based on the theory of viscosity solutions, and the techniques of homogenization which leads to a system of corrector equations. In contrast with the one-dimensional case, no explicit solution of the first corrector equation is available anymore. Finally, we provide some numerical results which illustrate the structure of the first order optimal controls.