Robust Optimization of Consumption with Random Endowment
AbstractWe consider the problem of optimal consumption for an investor who is risk and uncertainty avers. We model these preferences of the investor with the help of a convex risk-measure. Apart from consumption the agent has the possibility to invest initial capital and random endowment in a market where stock-prices are semimartingales. We formulate this as a maximin problem that will be solved by duality methods.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-063.
Length: 28 pages
Date of creation: Sep 2006
Date of revision:
duality theory; risk measures; optimal consumption; model uncertainty;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-FMK-2006-09-23 (Financial Markets)
- NEP-UPT-2006-09-23 (Utility Models & Prospect Theory)
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