A Consumption-Investment Problem with a Diminishing Basket of Goods

• Type: Article in International Conference Proceedings Book
• Date: 2015

Authors

Mousa, AS (Author) Other; Pinheiro, D (Author) Other; Alberto A. Pinto (Author) FCUP

Conference proceedings International

Title: OPERATIONAL RESEARCH

Pages: 295-310

16th National Conference of the APDIO

Braganca, PORTUGAL, JUN 03-05, 2013

Indexing

ISI Web of Knowledge - 1 Citation

Other information

Authenticus ID: P-00K-A41

DOI: 10.1007/978-3-319-20328-7_17

Abstract (EN): We consider the problem faced by an economic agent trying to find the optimal strategies for the joint management of her consumption from a basket of K goods that may become unavailable for consumption from some random time tau(i) onwards, and her investment portfolio in a financial market model comprised of one risk-free security and an arbitrary number of risky securities driven by a multidimensional Brownian motion. We apply previous abstract results on stochastic optimal control problem with multiple random time horizons to obtain a sequence of dynamic programming principles and the corresponding Hamilton-Jacobi-Bellman equations. We then proceed with a numerical study of the value function and corresponding optimal strategies for the problem under consideration in the case of discounted constant relative risk aversion utility functions (CRRA).

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 16