Mutual fund theorems when minimizing the probability of lifetime ruin
AbstractWe show that the mutual fund theorems of Merton [1971. Journal of Economic Theory 3, 373-413] extend to the problem of optimal investment to minimize the probability of lifetime ruin. We obtain two such theorems by considering a financial market both with and without a riskless asset for random consumption. The striking result is that we obtain two-fund theorems despite the additional source of randomness from consumption.
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Bibliographic InfoArticle provided by Elsevier in its journal Finance Research Letters.
Volume (Year): 5 (2008)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/frl
Other versions of this item:
- Erhan Bayraktar & Virginia R. Young, 2007. "Mutual Fund Theorems when Minimizing the Probability of Lifetime Ruin," Papers 0705.0053, arXiv.org, revised Mar 2008.
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