Optimal Consumption and Portfolio Choice for Retirees

2010 ◽  
Author(s):  
Lulu Zeng
Keyword(s):  
Portfolio Choice ◽  
Optimal Consumption

scholarly journals Consumption and Portfolio Choice under Internal Multiplicative Habit Formation

2019 ◽  
Vol 55 (7) ◽  
pp. 2334-2371
Author(s):  
Servaas van Bilsen ◽  
A. Lans Bovenberg ◽  
Roger J. A. Laeven
Keyword(s):  
Portfolio Choice ◽  
Habit Formation ◽  
Optimal Consumption ◽  
Investment Behavior ◽  
Risky Assets ◽  
General Utility ◽  
Marginal Propensity To Consume ◽  
Investment Opportunities ◽  
Marginal Propensity ◽  
Optimal Consumption And Investment

This paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit. We obtain closed-form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint. This enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock–bond investments. We also show that in a setting that combines habit formation with Epstein–Zin utility, consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease.

scholarly journals Optimal consumption/portfolio choice with borrowing rate higher than deposit rate

1998 ◽  
Vol 39 (4) ◽  
pp. 449-462 ◽  
Author(s):  
Wensheng Xu ◽  
Shuping Chen
Keyword(s):  
Portfolio Choice ◽  
Optimal Strategies ◽  
Optimal Investment ◽  
Dynamic Programming Principle ◽  
Optimal Consumption ◽  
Bank Account ◽  
Normal Diffusion ◽  
Hamilton Jacobi Bellman ◽  
Log Normal ◽  
Optimal Consumption And Investment

AbstractIn this paper, optimal consumption and investment decisions are studied for an investor who has available a bank account and a stock whose price is a log normal diffusion. The bank pays at an interest rate r(t) for any deposit, and vice takes at a larger rate r′(t) for any loan. Optimal strategies are obtained via Hamilton-Jacobi-Bellman (HJB) equation which is derived from dynamic programming principle. For the specific HARA case, we get the optimal consumption and optimal investment explicitly, which coincides with the classical one under the condition r′(t) ≡ r(t)

Time-Varying Margin Requirements and Optimal Portfolio Choice

2016 ◽  
Vol 51 (2) ◽  
pp. 655-683 ◽  
Author(s):  
Oleg Rytchkov
Keyword(s):  
Portfolio Choice ◽  
Optimal Portfolio ◽  
Optimal Consumption ◽  
Time Varying ◽  
Recursive Preferences ◽  
Margin Requirements ◽  
Portfolio Problem ◽  
Hedging Demand

AbstractThis paper studies the optimal consumption and portfolio problem of an investor with recursive preferences who is subject to time-varying margin requirements. The level of the requirements at each moment is determined by contemporaneous volatility of returns, which is stochastic and may have jumps. I show that the nonstandard hedging demand produced by margin requirements increases with their persistence and volatility. However, for realistic values of parameters, the hedging demand is small even in the presence of jumps, and contemporaneous jumps in prices have a much stronger effect on optimal portfolio than jumps in constraints.

scholarly journals Optimal consumption and portfolio choice with ambiguous interest rates and volatility

2020 ◽  
Author(s):  
Qian Lin ◽  
Frank Riedel
Keyword(s):  
Interest Rates ◽  
Portfolio Choice ◽  
Continuous Time ◽  
Bond Market ◽  
Asset Market ◽  
Knightian Uncertainty ◽  
Optimal Consumption ◽  
Large Uncertainty ◽  
Time Consumption ◽  
Optimal Behavior

Abstract We study continuous-time consumption and portfolio choice in the presence of Knightian uncertainty about interest rates. We develop the stochastic model that involves singular priors and analyze optimal behavior. When there is sufficiently large uncertainty about interest rates, the agent invests in the asset market only and abstains from the bond market.

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