Related papers: Optimal Consumption under Habit Formation In Marke…
We provide a detailed characterization of the optimal consumption stream for the additive habit-forming utility maximization problem, in a framework of general discrete-time incomplete markets and random endowments. This characterization…
The "standard" Merton formulation of optimal investment and consumption involves optimizing the integrated lifetime utility of consumption, suitably discounted, together with the discounted future bequest. In this formulation the utility of…
We formulate an infinite-horizon optimal investment and consumption problem, in which an individual forms a habit based on the exponentially weighted average of her past consumption rate, and in which she invests in a Black-Scholes market.…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
We formulate and solve a deterministic optimal consumption problem to maximize the discounted CRRA utility of an individual's consumption-to-habit process assuming she only invests in a riskless market and that she is unwilling to consume…
We consider a model of optimal investment and consumption with both habit formation and partial observations in incomplete It\^{o} processes market. The investor chooses his consumption under the addictive habits constraint while only…
This paper studies a loss-averse version of the multiplicative habit formation preference and the corresponding optimal investment and consumption strategies over an infinite horizon. The agent's consumption preference is depicted by a…
This paper studies a type of consumption preference where some adjustment costs are incured whenever the past spending maximum and the past spending minimum records are updated. This preference can capture the adverse effects of the…
This paper studies optimal consumption and saving decisions under uncertainty about the transition dynamics of the economic environment. We consider a general optimal savings problem in which the exogenous state governing discounting,…
This paper studies a composite problem involving the decision making of the optimal entry time and dynamic consumption afterwards. In stage-1, the investor has access to full market information subjecting to some information costs and needs…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…
We consider the problem of maximizing expected utility from consumption in a constrained incomplete semimartingale market with a random endowment process, and establish a general existence and uniqueness result using techniques from convex…
This study investigates an optimal consumption--investment problem in which the unobserved stock trend is modulated by a hidden Markov chain that represents different economic regimes. In the classical approach, the hidden state is…
This paper studies an optimal consumption problem for a loss-averse agent with reference to past consumption maximum. To account for loss aversion on relative consumption, an S-shaped utility is adopted that measures the difference between…
This paper studies the infinite-horizon optimal consumption with a path-dependent reference under exponential utility. The performance is measured by the difference between the nonnegative consumption rate and a fraction of the historical…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…