Optimization of Investment-Dividend Problem in a Diffusion Model with Transaction Costs and Investment Constraints

This paper investigates the investment-dividend optimization problem for a corporation with transaction costs and investment constraints. The main feature is that we assume general constraints on investments including the special case of short-sale and borrowing constraints. This results in a regular-impulse stochastic control problem. The nontrivial case is that the investment can't meet the loss of wealth due to discounting. In this case, delicate analysis is carried out on QVI w.r.t. three possible situations, leading to an explicit construction of the value functions together with the optimal policies. We also give explicit conclusion of the trivial case at last.