Optimal consumption and portfolio selection problem with downside consumption constraints

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We study a general optimal consumption and portfolio selection problem of an infinitely-lived investor whose consumption rate process is subjected to downside constraint. That is, her consumption rate is greater than or equals to some positive constant. We obtain the general optimal policies in an explicit form using martingale method and Feynman-Kac formula. We derive some numerical results of optimal consumption and portfolio in the special case of a constant relative risk aversion (CRRA) utility function. (c) 2006 Elsevier Inc. All rights reserved.
Publisher
Elsevier Science Inc
Issue Date
2007-05
Language
English
Article Type
Article
Keywords

SUBSISTENCE CONSUMPTION; EXPLICIT SOLUTION; MODEL

Citation

APPLIED MATHEMATICS AND COMPUTATION, v.188, no.2, pp.1801 - 1811

ISSN
0096-3003
DOI
10.1016/j.amc.2006.11.053
URI
http://hdl.handle.net/10203/89671
Appears in Collection
MA-Journal Papers(저널논문)
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