Optimal Investment and Consumption Decisions under the Constant Elasticity of Variance Model
Joint Authors
Rong, Xi-min
Zhao, Hui
Zhang, Chubing
Chang, Hao
Source
Mathematical Problems in Engineering
Issue
Vol. 2013, Issue 2013 (31 Dec. 2013), pp.1-11, 11 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2013-11-20
Country of Publication
Egypt
No. of Pages
11
Main Subjects
Abstract EN
We consider an investment and consumption problem under the constant elasticity of variance (CEV) model, which is an extension of the original Merton’s problem.
In the proposed model, stock price dynamics is assumed to follow a CEV model and our goal is to maximize the expected discounted utility of consumption and terminal wealth.
Firstly, we apply dynamic programming principle to obtain the Hamilton-Jacobi-Bellman (HJB) equation for the value function.
Secondly, we choose power utility and logarithm utility for our analysis and apply variable change technique to obtain the closed-form solutions to the optimal investment and consumption strategies.
Finally, we provide a numerical example to illustrate the effect of market parameters on the optimal investment and consumption strategies.
American Psychological Association (APA)
Chang, Hao& Rong, Xi-min& Zhao, Hui& Zhang, Chubing. 2013. Optimal Investment and Consumption Decisions under the Constant Elasticity of Variance Model. Mathematical Problems in Engineering،Vol. 2013, no. 2013, pp.1-11.
https://search.emarefa.net/detail/BIM-1032509
Modern Language Association (MLA)
Chang, Hao…[et al.]. Optimal Investment and Consumption Decisions under the Constant Elasticity of Variance Model. Mathematical Problems in Engineering No. 2013 (2013), pp.1-11.
https://search.emarefa.net/detail/BIM-1032509
American Medical Association (AMA)
Chang, Hao& Rong, Xi-min& Zhao, Hui& Zhang, Chubing. Optimal Investment and Consumption Decisions under the Constant Elasticity of Variance Model. Mathematical Problems in Engineering. 2013. Vol. 2013, no. 2013, pp.1-11.
https://search.emarefa.net/detail/BIM-1032509
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1032509