Related papers: Bifurcation in optimal retirement
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…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…
Motivated by recent axiomatic developments, we study the risk- and ambiguity-averse investment problem where trading takes place over a fixed finite horizon and terminal payoffs are evaluated according to a criterion defined in terms of a…
Retirement prediction helps individuals and institutions make informed financial, lifestyle, and workforce decisions based on estimated retirement portfolios. This paper attempts to predict retirement using Monte Carlo simulations, allowing…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
We analyze and quantify, in a financial market with parameter uncertainty and for a Constant Relative Risk Aversion investor, the utility effects of two different boundedly rational (i.e., sub-optimal) investment strategies (namely, myopic…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We develop a duality theory for the problem of maximising expected lifetime utility from inter-temporal wealth over an infinite horizon, under the minimal no-arbitrage assumption of No Unbounded Profit with Bounded Risk (NUPBR). We use only…
Insurance and annuity products covering several lives require the modelling of the joint distribution of future lifetimes. In the interest of simplifying calculations, it is common in practice to assume that the future lifetimes among a…
We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and who can purchase a reversible life annuity. The surrender charge of a life annuity is a proportion of its…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
We extend the Annually Recalculated Virtual Annuity (ARVA) spending rule for retirement savings decumulation to include a cap and a floor on withdrawals. With a minimum withdrawal constraint, the ARVA strategy runs the risk of depleting the…
We provide investment advice for an individual who wishes to minimize her lifetime poverty, with a penalty for bankruptcy or ruin. We measure poverty via a non-negative, non-increasing function of (running) wealth. Thus, the lower wealth…
CRRA utility where the risk aversion coefficient is a constant is commonly seen in various economics models. But wealth-driven risk aversion rarely shows up in investor's investment problems. This paper mainly focus on numerical solutions…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
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 pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…