Consumption and Investment Optimization under Constraints
AbstractWe analyze a problem of maximization of expected terminal wealth and consumption under constraints in a general framework including financial models with constrained portfolios, labor income and large investor models. By using general optional decomposition under constraints in a multiplicative form, we first develop a dual formulation under minimal assumption modeled as in Pham and Mnif (2002). We then are able to prove an existence and uniqueness of an optimal solution to primal and to the corresponding dual problem. An optimal investment and consumption plan to the original problem then can be found by convex duality, similarly to the case considered by Kramkov and Schachermayer (1999).
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0211004.
Length: 31 pages
Date of creation: 19 Nov 2002
Date of revision: 19 Nov 2002
Note: Type of Document - Tex/PDF; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 31
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Stochastic Optimization; Consumption and Investment Optimization; Duality Theory; Convex and State Constraints; Utility Maximization; Optional Decomposition; Minimax Theorem};
Find related papers by JEL classification:
- G - Financial Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-28 (All new papers)
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