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We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction…

In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…

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…

Take up of microcredit by the poor for investment in businesses or human capital turned out to be very low. We show that this could be explained by risk aversion, without relying on fixed costs or other forms of non-convexity in the…

A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…

There is no known explicit global closed form solution for the standard income fluctuation problem with a borrowing constraint and where wealth accumulates with a constant interest rate $r$. Using a continuous time formulation, I derive an…

We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…

During the Great Recession, Democrats in the United States argued that government spending could be utilized to "grease the wheels" of the economy in order to create wealth and to increase employment; Republicans, on the other hand,…

We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…

We study optimal consumption and retirement using a Cobb-Douglas utility and a simple model in which an interesting bifurcation arises. With high wealth, individuals plan to retire. With low wealth they plan to never retire. At a critical…

We consider the problem of how an individual can use term life insurance to maximize the probability of reaching a given bequest goal, an important problem in financial planning. We assume that the individual buys instantaneous term life…

We study an infinite-horizon optimal investment, consumption and insurance problem for an economic agent who consumes a perishable and a durable good. The agent trades in a risk-free asset, a risky asset, and a durable good whose price…

In this paper, we study an intertemporal utility maximization problem in which an investor chooses consumption and portfolio strategies in the presence of a stochastic factor and a no-borrowing constraint. In the spirit of the Kim-Omberg…

We study an optimal control problem encompassing investment, consumption, and retirement decisions under exponential (CARA-type) utility. The financial market comprises a bond with constant drift and a stock following geometric Brownian…

This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…

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 determine the optimal strategy for investing in a Black-Scholes market in order to maximize the probability that wealth at death meets a bequest goal $b$, a type of goal-seeking problem, as pioneered by Dubins and Savage (1965, 1976).…

We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level…

We study the optimal investment-consumption problem for a member of defined contribution plan during the decumulation phase. For a fixed annuitization time, to achieve higher final annuity, we consider a variable consumption rate. Moreover,…

This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…