Minimizing the probability of lifetime ruin under stochastic volatility
AbstractWe assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. Given the rate of consumption, we find the optimal investment strategy for the individual who wishes to minimize the probability of going bankrupt. To solve this minimization problem, we use techniques from stochastic optimal control.
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Bibliographic InfoArticle provided by Elsevier in its journal Insurance: Mathematics and Economics.
Volume (Year): 49 (2011)
Issue (Month): 2 (September)
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Web page: http://www.elsevier.com/locate/inca/505554
Optimal investment Minimizing the probability of lifetime ruin Stochastic volatility;
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- Erhan Bayraktar & Virginia R. Young, 2007. "Minimizing the Probability of Lifetime Ruin under Borrowing Constraints," Papers math/0703850, arXiv.org.
- Mattias Jonsson & K. Ronnie Sircar, 2002. "Partial Hedging In A Stochastic Volatility Environment," Mathematical Finance, Wiley Blackwell, vol. 12(4), pages 375-409.
- Erhan Bayraktar & Virginia R. Young, 2007. "Correspondence between Lifetime Minimum Wealth and Utility of Consumption," Papers math/0703820, arXiv.org.
- Bayraktar, Erhan & Young, Virginia R., 2007. "Minimizing the probability of lifetime ruin under borrowing constraints," Insurance: Mathematics and Economics, Elsevier, vol. 41(1), pages 196-221, July.
- Erhan Bayraktar & Virginia Young, 2007. "Correspondence between lifetime minimum wealth and utility of consumption," Finance and Stochastics, Springer, vol. 11(2), pages 213-236, April.
- Erhan Bayraktar & Virginia R. Young, 2008. "Minimizing the Probability of Ruin when Consumption is Ratcheted," Papers 0806.2358, arXiv.org.
- Wang, Ting & Young, Virginia R., 2012. "Maximizing the utility of consumption with commutable life annuities," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 352-369.
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