Optimal Consumption and Investment With Bankruptcy - Couverture rigide

Sethi, Suresh P.

Couverture rigide

ISBN 10 : 079239755X ISBN 13 : 9780792397557

Editeur : Kluwer Academic Publishers, 1996

Synopsis

This book presents papers on continuous-time consumption- investment models by Suresh Sethi and various co-authors. Sir Isaac Newton said that he saw so far because he stood on the shoulders of gi- ants. Giants upon whose shoulders Professor Sethi and colleagues stand are Robert Merton, particularly Merton's (1969, 1971, 1973) seminal papers, and Paul Samuelson, particularly Samuelson (1969). Karatzas, Lehoczky, Sethi and Shreve (1986), henceforth KLSS, re- produced here as Chapter 2, reexamine the model proposed by Mer- ton. KLSS use methods of modern mathematical analysis, taking care to prove the existence of integrals, check the existence and (where appro- priate) the uniqueness of solutions to equations, etc. KLSS find that un- der some conditions Merton's solution is correct; under others, it is not. In particular, Merton's solution for aHARA utility-of-consumption is correct for some parameter values and not for others. The problem with Merton's solution is that it sometimes violates the constraints against negative wealth and negative consumption stated in Merton (1969) and presumably applicable in Merton (1971 and 1973). This not only affects the solution at the zero-wealth, zero-consumption boundaries, but else- where as well. Problems with Merton's solution are analyzed in Sethi and Taksar (1992), reproduced here as Chapter 3.

A propos du livre

Présentation de l'éditeur

The problem of optimal consumption and investment is concerned with the decisions of a single agent endowed with some initial wealth who seeks to maximize total expected discounted utility of consumption. The decisions are the rate of consumption and the allocation of their wealth directed to risky and risk-free investments over time. The problem was first studied by Paul Samuelson and Robert Merton in 1969; however none of their formulations took into account the possibility that an agent might go bankrupt in the process. In a set of articles published in 1979 and 1983, Suresh Sethi and various co-authors explicitly introduced a bankruptcy value/penalty in the consumption/investment model. In addition, they also introduced a nonzero subsistence consumption level, which makes the consideration of bankruptcy even more important. This provided the ability to deal mathematically with the problems of bankruptcy in the study of consumption and investment. Optimal Consumption and Investment with Bankruptcy provides a useful frame for deepening our understanding of the consumption and portfolio selection behavior of individuals and households.

Détails de l'édition

• Éditeur: Kluwer Academic Publishers
• Date d'édition: 1996
• Langue: anglais
• ISBN 10: 079239755X
• ISBN 13: 9780792397557
• Reliure: Relié
• Nombre de pages: 448
• Coordonnées du fabricant: Springer Nature Customer Service Center GmbH; ProductSafety@springernature.com; ; Europaplatz 3; Heidelberg; 69115; Allemagne