Optimal life insurance purchase, consumption and investment on a financial market with multi-dimensional diffusive terms

• Tipo: Artigo em Revista Científica Internacional
• Data: 2014

Autores

I. Duarte (Autor) Outra; D. Pinheiro (Autor) Outra; Alberto Pinto (Autor) FCUP; S. R. Pliska (Autor) Outra

Revista

Título: Optimization

Vol. 63 Nº 11

Páginas: 1737-1760

ISSN: 0233-1934

Editora: Taylor & Francis

Indexação

ISI Web of Knowledge - 18 Citações

Scopus - 21 Citações

Classificação Científica

FOS: Ciências exactas e naturais > Matemática

Outras Informações

ID Authenticus: P-009-Q8N

DOI: 10.1080/02331934.2012.665054

Abstract (EN): We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the income to purchase life insurance in order to provide for his estate, while investing his savings in a financial market comprised of one risk-free security and an arbitrary number of risky securities driven by multi-dimensional Brownian motion. We then provide a detailed analysis of the optimal consumption, investment and insurance purchase strategies for the wage earner whose goal is to maximize the expected utility obtained from his family consumption, from the size of the estate in the event of premature death, and from the size of the estate at the time of retirement. We use dynamic programming methods to obtain explicit solutions for the case of discounted constant relative risk aversion utility functions and describe new analytical results which are presented together with the corresponding economic interpretations.

Idioma: Inglês

Tipo (Avaliação Docente): Científica

Nº de páginas: 24