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Wealth and admissibility. The dollar holding $\theta$ earns the risky return, while $w-\theta$ earns the continuous-time bank account return. Removing consumption therefore givesHere $\theta$ is a dollar amount, not a number of shares; the number of shares is ${\theta }_t/S_t$. Both controls must use available information: take $\theta$ predictable and $c\ge 0$ progressively measurable, withalmost surely on every finite interval. Require a well-defined objective and an admissible trading strategy satisfying $w_t\ge 0$. At zero portfolio wealth this excludes continued risky gambling or positive consumption. The state-price budget constraint rules out doubling strategies. Throughout the diffusion calculations take $\sigma \ne 0$, positive discount $\rho$, positive decay $\lambda$, and finite value; degeneracies are discussed where they affect the conclusions.

Satisfaction and dynamic programming. Write the consumption satisfaction stock asThe product rule gives, almost everywhere in time,This state is a finite-variation process, so it has no quadratic covariation with portfolio wealth. Applying the Itô formula to the discounted value function over a short interval, then using dynamic programming, gives the interior HJB equationAssuming $V_{ww}<0$, completing the square givesThe last supremum is zero if $V_{\xi }-V_w\le 0$ and infinite otherwise. Thus the gradient constraint for unbounded consumption is $V_{\xi }\le V_w$, and $c=0$ wherever the inequality is strict. Since there is no direct penalty for a very large consumption rate, an active boundary can involve singular consumption control. In that relaxed interpretation the HJB equation isWith ordinary rate controls, this describes the supremum and its limiting transfer policy; it does not promise that an instantaneous transfer is attained by a finite rate.

Power reduction. An additive constant in the utility function only adds a control-independent constant divided by $\rho$ to the value, so normalize $U(\xi )={\xi }^{1-R}/(1-R)$. Put $p=1-R$ and $x=w/\xi$ for $\xi >0$. Scaling portfolio wealth, consumption satisfaction and the controls by the same positive number gives the wealth-to-satisfaction reductionConsequently the reduced HJB equation isIn the strict waiting region the first expression vanishes and consumption is zero. On a transfer region the second vanishes; integrating it gives $v(x)=K(1+x{)}^p$. This reflects preservation of $w+\xi$ during an instantaneous wealth-to-satisfaction transfer.

Why a waiting threshold is expected, and its qualification. The gradient constraint for unbounded consumption compares the benefit of increasing consumption satisfaction with the opportunity cost of spending financial portfolio wealth. When consumption satisfaction is already large relative to cash, waiting lets consumption satisfaction decay while financial portfolio wealth earns returns; consuming immediately can be wasteful. Homogeneity makes the comparison depend only on $x$. For fixed $s=w+\xi$, joint concavity of the value function makes $q_s(a)=V(s-a,a)$ concave in financial portfolio wealth $a$. It is nondecreasing because an immediate transfer can reproduce any smaller financial allocation. Consequently its derivative $V_w-V_{\xi }$ is nonnegative and nonincreasing in $a$: a strict waiting region, if present, starts at zero financial portfolio wealth and ends at a single transfer boundary. Homogeneity makes the corresponding boundary a ratio $x_{\ast }$. In the usual finite-boundary regime this gives $c=0$ for $x<x_{\ast }$, and transfers push a larger ratio down towards $x_{\ast }$. The condition is a comparison of marginal values, not the ordinary formula $c=(V_w{)}^{-1/R}$: current utility function here depends on consumption satisfaction, not on current consumption.

A positive threshold is not guaranteed by the printed hypotheses alone. A useful sufficient local test illustrates the intended argument. Let $a=\rho +\lambda p>0$. At zero portfolio wealth,Starting with a small extra portfolio wealth $\epsilon$, holding it in the continuous-time bank account until a fixed time $t$, then transferring it into consumption satisfaction, has right derivative in $\epsilon$ at zero equal toTherefore, if $\rho <r+\lambda R$, the portfolio wealth marginal value is strictly larger than the consumption satisfaction marginal value at zero. With the usual continuity of marginal values, there is a positive interval on which the gradient constraint for unbounded consumption is strict. The fixed-total-resource concavity argument then gives the threshold structure.

For a concrete counterexample to an unconditional positive threshold, take $R=1/2$, $\lambda =1$, $r=\mu =1/10$, $\sigma =1$ and $\rho =2$. There is zero market price of risk. The relaxed value isIndeed $F_{\xi }=F_w$, $F_{ww}<0$, and the optimized waiting residual, after division by ${\xi }^p$, isbecause $(r+\lambda )/a<1$ and the integrand is decreasing. The Itô formula gives an upper bound by $F$, while transferring all portfolio wealth into consumption satisfaction over intervals tending to zero attains that bound in the limit. Hence the transfer boundary is $x_{\ast }=0$ in this example. The positive-threshold explanation needs a parameter regime supporting a genuine waiting region. For $R>1$, even the zero-wealth value is finite only if $\rho >\lambda (R-1)$; otherwise decaying consumption satisfaction gives value $-\infty$.