Optimum consumption and portfolio rules in a continuous-time model☆
Citations
37 citations
36 citations
36 citations
36 citations
Cites background or methods from "Optimum consumption and portfolio r..."
...Moreover, it follows (see Merton 1971) from the dynamic programming principle that ifJ (x, τ ) is C2,1( +, +),1 it satisfies the Bellman equation: max A { 1 2 σ2A2Jxx + (µ − r )AJx } + rxJx −Jτ = 0, (x, τ ) ∈ (0,∞)× (0, T] (2.3) with initial and boundary conditions{ J (x, 0) = U (x) ∀x ≥ 0 J (0, τ…...
[...]
...Using the properties ofU and the linearity of the state dynamics it can be shown (see, for example, Merton 1971) thatJ is strictly increasing and concave in x....
[...]
...This is the classical optimal investment model, introduced by Merton (1971), in a market with a stationary opportunity set and a finite investment horizon....
[...]
36 citations
References
4,908 citations
3,597 citations
2,369 citations
1,293 citations
987 citations