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Optimal consumption and investment with liquid and illiquid assets

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Jin Hyuk Choi

Mathematical Finance · Submitted 23 Feb 2016

abstract compiled · 2026-09-23 · no language-model review

The authors' main claim We fully characterize the optimal consumption and trading strategies in terms of the solution of the free boundary ODE with an integral constraint.

how it is stated · asserted 1.00 read the record →

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arXiv ID1602.06998 (version 5)
Pith IDQL2PHZEV, Pith's permanent record of this paper and its review
CitationJin Hyuk Choi. "Optimal consumption and investment with liquid and illiquid assets." arXiv:1602.06998 (2016). https://pith.science/paper/QL2PHZEV
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Compiled by classifier-1.13.0 via TypeSafe API, question bank abstract-p1-20260923, 2026-09-23: 1 request, 4,281 input tokens.

What the abstract itself states, as probabilities: claims first 0.03 · states limitation 0.39 · human participants 0.02 · controlled comparison 0.60 · randomized assignment 0.01 · states quantitative result 0.08 · compares with prior results 0.83 · mentions code or data availability 0.02.

The abstract, sentence by sentence

arXiv listing abstract v5. Results and the main claim are underlined; .

We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction costs) and one illiquid risky asset (proportional transaction costs). We fully characterize the optimal consumption and trading strategies in terms of the solution of the free boundary ODE with an integral constraint. We find an explicit characterization of model parameters for the well-posedness of the problem, and show that the problem is well-posed if and only if there exists a shadow price process. Finally, we describe how the investor's optimal strategy is affected by the additional opportunity of trading the liquid risky asset, compared to the simpler model with one bond and one illiquid risky asset.

background contribution method result interpretation main claim

What the classifier reports for each sentence. The number is the probability it gave the label.
#sentencerolethe authors' own workstates the main conclusionstrength
s0 We consider an optimal consumption/investment problem to maximize expected utility from consumption. background 0.74 0.81 0.06 asserted 0.79
s1 In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction costs) and one illiquid risky asset (proportional transaction costs). method 0.81 0.25 0.03 asserted 0.95
s2 We fully characterize the optimal consumption and trading strategies in terms of the solution of the free boundary ODE with an integral constraint. contribution 0.47 0.96 0.50 asserted 1.00
s3 We find an explicit characterization of model parameters for the well-posedness of the problem, and show that the problem is well-posed if and only if there exists a shadow price process. result 0.93 0.96 0.28 asserted 1.00
s4 Finally, we describe how the investor's optimal strategy is affected by the additional opportunity of trading the liquid risky asset, compared to the simpler model with one bond and one illiquid risky asset. result 0.53 0.94 0.15 asserted 0.92

What kind of paper the classifier reports this is: theoretical result 1.00 · evidence from proof or derivation 1.00.

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  • references and citing sentences
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  • P abstract
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  • S sections
  • T body sentences
  • C citations
  • R cross-paper relations

Every quoted sentence on this record is the authors'. Every label is from Pith's closed vocabulary, with the probability shown beside it. Every number in the measurements table is the authors', checked by code. Record as JSON

The paper
Original abstract

We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction costs) and one illiquid risky asset (proportional transaction costs). We fully characterize the optimal consumption and trading strategies in terms of the solution of the free boundary ODE with an integral constraint. We find an explicit characterization of model parameters for the well-posedness of the problem, and show that the problem is well-posed if and only if there exists a shadow price process. Finally, we describe how the investor's optimal strategy is affected by the additional opportunity of trading the liquid risky asset, compared to the simpler model with one bond and one illiquid risky asset.

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What this paper does with the arXiv papers it cites

Each citing sentence is taken from the citing paper's LaTeX source and typed by Pith's classifier. A label appears at probability 0.8 or more (0.95 for support), a contest at 0.7 or more; the quoted words are the citing authors'. How each label was checked · JSON

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