Title :
An optimal investment problem with randomly terminating income
Author :
Vellekoop, Michel ; Davis, Mark
Author_Institution :
FELab, Univ. of Twente, Enschede, Netherlands
Abstract :
We investigate an optimal consumption and investment problem where we receive a certain fixed income stream that is terminated at a random time. It turns out that the optimal strategy and the value function for this problem differ considerably from the case where our income stream is certain to continue indefinitely. More specifically, the optimal consumption policy involves a function that is not analytic around the point that represents zero wealth.
Keywords :
investment; random processes; optimal consumption; optimal investment problem; randomly terminating income; Brownian motion; Closed-form solution; Computer science; Equations; Infinite horizon; Investments; Mathematics; Remuneration; Stochastic processes; Uncertainty;
Conference_Titel :
Decision and Control, 2009 held jointly with the 2009 28th Chinese Control Conference. CDC/CCC 2009. Proceedings of the 48th IEEE Conference on
Conference_Location :
Shanghai
Print_ISBN :
978-1-4244-3871-6
Electronic_ISBN :
0191-2216
DOI :
10.1109/CDC.2009.5400455