Optimal investment and consumption with forward preferences and uncertain parameters
Mathematical Finance
2023-11-20 v3
Abstract
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We provide a new PDE characterization and a novel semi-explicit saddle-point construction of forward preferences and optimal strategies. We further present a more detailed construction of forward preferences and optimal strategies under constant relative risk aversion (CRRA). Key findings emphasize the necessity of a specific relationship between the initial investment preference and the forward consumption preference, indicating a long-term decreasing trend in forward consumption preference behavior.
Keywords
Cite
@article{arxiv.1807.01186,
title = {Optimal investment and consumption with forward preferences and uncertain parameters},
author = {Wing Fung Chong and Gechun Liang},
journal= {arXiv preprint arXiv:1807.01186},
year = {2023}
}