Related papers: Optimal Retirement Time and Consumption with the V…
We extend the lifecycle model (LCM) of consumption over a random horizon (a.k.a. the Yaari model) to a world in which (i.) the force of mortality obeys a diffusion process as opposed to being deterministic, and (ii.) a consumer can adapt…
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…
This paper examines the optimal annuitization, investment and consumption strategies of a utility-maximizing retiree facing a stochastic time of death under a variety of institutional restrictions. We focus on the impact of aging on the…
Evidence shows that the labor participation rate of retirement age cohorts is non-negligible, and it is a widespread phenomenon globally. In the United States, the labor force participation rate for workers age 75 and older is projected to…
We solve a lifecycle model in which the consumer's chronological age does not move in lockstep with calendar time. Instead, biological age increases at a stochastic non-linear rate in time like a broken clock that might occasionally move…
This paper investigates the interactions among consumption/savings, investment, and retirement choices with income disaster. We consider low-income people who are exposed to income disaster so that they retire involuntarily when income…
This paper investigates the optimal consumption, investment, and life insurance/annuity decisions for a family in an inflationary economy under money illusion. The family can invest in a financial market that consists of nominal bonds,…
We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following geometric Brownian motion as in the Black-Scholes model. Under a constant rate of consumption, we find the…
This paper studies the optimal investment problem for a hybrid pension plan under model uncertainty, where both the contribution and the benefit are adjusted depending on the performance of the plan. Furthermore, an age and time-dependent…
Justification bias, wherein retirees may report poorer health to rationalize their retirement, poses a major concern to the widely-used measure of self-assessed health in retirement studies. This paper introduces a novel method for testing…
This paper investigates the consumption and risk taking decision of an economic agent with partial irreversibility of consumption decision by formalizing the theory proposed by Duesenberry (1949). The optimal policies exhibit a type of the…
We study an intertemporal consumption and portfolio choice problem under Knightian uncertainty in which agent's preferences exhibit local intertemporal substitution. We also allow for market frictions in the sense that the pricing…
The retirement funding problem addresses the question of how to manage a retiree's savings to provide her with a constant post-tax inflation adjusted consumption throughout her lifetime. This consists of choosing withdrawals and transfers…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
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…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…