Optimum consumption and portfolio rules in a continuous-time model☆
TLDR
In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.About:
This article is published in Journal of Economic Theory.The article was published on 1971-12-01 and is currently open access. It has received 4952 citations till now. The article focuses on the topics: Geometric Brownian motion & Intertemporal portfolio choice.read more
Citations
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Smooth Solutions to Optimal Investment Models with Stochastic Volatilities and Portfolio Constraints
TL;DR: In this paper, an extension of Merton's optimal investment problem to a multidimensional model with stochastic volatility and portfolio constraints is presented, and an optimal portfolio is shown to exist, and is expressed in terms of the classical solution to this semilinear equation.
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Survival and growth with a liability: optimal portfolio strategies in continuous time
TL;DR: In this paper, the optimal behavior of an investor who is forced to withdraw funds continuously at a fixed rate per unit time was studied, e.g., to pay for a liability, to consume, or to pay dividends.
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Parameter estimation and bias correction for diffusion processes
TL;DR: In this paper, a parametric bootstrap procedure is proposed to correct bias for general diffusion processes with a theoretical justification, which can effectively reduce both the bias and the mean square error of parameter estimates, for both univariate and multivariate processes.
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Portfolio Claustrophobia: Asset Pricing in Markets with Illiquid Assets
TL;DR: In this paper, the authors study the asset-pricing implications of this type of illiquidity in an exchange economy with heterogeneous agents and show that the value of liquidity can represent a large portion of the equilibrium price of an asset.
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Portfolio optimization with Markov-modulated stock prices and interest rates
Nicole Bäuerle,Ulrich Rieder +1 more
TL;DR: This work investigates the problem of maximizing the expected utility from terminal wealth and solves it by stochastic control methods for different utility functions by comparing the value function of the problem to one where the authors have constant (average) market data.
References
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Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case
TL;DR: In this paper, the combined problem of optimal portfolio selection and consumption rules for an individual in a continuous-time model was examined, where his income is generated by returns on assets and these returns or instantaneous "growth rates" are stochastic.
Book
The theory of stochastic processes
David Cox,Hilton D. Miller +1 more
TL;DR: This book should be of interest to undergraduate and postgraduate students of probability theory.
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Lifetime Portfolio Selection By Dynamic Stochastic Programming
TL;DR: In this paper, the optimal consumption-investment problem for an investor whose utility for consumption over time is a discounted sum of single-period utilities, with the latter being constant over time and exhibiting constant relative risk aversion (power-law functions or logarithmic functions), is discussed.
Book
Stochastic Stability and Control
TL;DR: In this article, a book on stochastic stability and control dealing with Liapunov function approach to study of Markov processes is presented, which is based on the work of this article.
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