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Optimal consumption/investment policies with undiversifiable income risk and liquidity constraints

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  • Munk, Claus

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  • Munk, Claus, 2000. "Optimal consumption/investment policies with undiversifiable income risk and liquidity constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 24(9), pages 1315-1343, August.
  • Handle: RePEc:eee:dyncon:v:24:y:2000:i:9:p:1315-1343
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    References listed on IDEAS

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    1. Cox, John C. & Huang, Chi-fu, 1989. "Optimal consumption and portfolio policies when asset prices follow a diffusion process," Journal of Economic Theory, Elsevier, vol. 49(1), pages 33-83, October.
    2. He, Hua & Pages, Henri F, 1993. "Labor Income, Borrowing Constraints, and Equilibrium Asset Prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(4), pages 663-696, October.
    3. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
    4. Heaton, John & Lucas, Deborah, 1997. "Market Frictions, Savings Behavior, And Portfolio Choice," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 76-101, January.
    5. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    6. Hindy, Ayman & Huang, Chi-fu & Zhu, Steven H., 1997. "Numerical analysis of a free-boundary singular control problem in financial economics," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 297-327.
    7. Hyeng Keun Koo, 1998. "Consumption and Portfolio Selection with Labor Income: A Continuous Time Approach," Mathematical Finance, Wiley Blackwell, vol. 8(1), pages 49-65.
    8. Svensson, Lars E. O. & Werner, Ingrid M., 1993. "Nontraded assets in incomplete markets : Pricing and portfolio choice," European Economic Review, Elsevier, vol. 37(5), pages 1149-1168, June.
    9. Duffie, Darrell & Fleming, Wendell & Soner, H. Mete & Zariphopoulou, Thaleia, 1997. "Hedging in incomplete markets with HARA utility," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 753-782, May.
    10. Cuoco, Domenico, 1997. "Optimal Consumption and Equilibrium Prices with Portfolio Constraints and Stochastic Income," Journal of Economic Theory, Elsevier, vol. 72(1), pages 33-73, January.
    11. Hans Andersson & Buddhavarapu Sailesh Ramamurtie & Bharat Ramaswami, 1995. "An intertemporal model of consumption and portfolio allocation," FRB Atlanta Working Paper 95-15, Federal Reserve Bank of Atlanta.
    12. Darrell Duffie & Thaleia Zariphopoulou, 1993. "Optimal Investment With Undiversifiable Income Risk," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 135-148.
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    Cited by:

    1. Larsen, Linda Sandris & Munk, Claus, 2012. "The costs of suboptimal dynamic asset allocation: General results and applications to interest rate risk, stock volatility risk, and growth/value tilts," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 266-293.
    2. Wang, J. & Forsyth, P.A., 2010. "Numerical solution of the Hamilton-Jacobi-Bellman formulation for continuous time mean variance asset allocation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 207-230, February.
    3. L. A. Bordag & I. P. Yamshchikov & D. Zhelezov, 2015. "Portfolio optimization in the case of an asset with a given liquidation time distribution," Post-Print hal-01186961, HAL.
    4. John H. Cochrane, 2014. "A Mean-Variance Benchmark for Intertemporal Portfolio Theory," Journal of Finance, American Finance Association, vol. 69(1), pages 1-49, February.
    5. Morten Tolver Kronborg, 2014. "Optimal Consumption and Investment with Labor Income and European/American Capital Guarantee," Risks, MDPI, Open Access Journal, vol. 2(2), pages 1-24, May.
    6. Munk, Claus & Sørensen, Carsten, 2010. "Dynamic asset allocation with stochastic income and interest rates," Journal of Financial Economics, Elsevier, vol. 96(3), pages 433-462, June.
    7. European Central Bank & Stefano Corradin, 2009. "Household Leverage," 2009 Meeting Papers 906, Society for Economic Dynamics.
    8. Ljudmila A. Bordag & Ivan P. Yamshchikov & Dmitry Zhelezov, 2014. "Portfolio optimization in the case of an asset with a given liquidation time distribution," Papers 1407.3154, arXiv.org.
    9. Björn Bick & Holger Kraft & Claus Munk, 2013. "Solving Constrained Consumption-Investment Problems by Simulation of Artificial Market Strategies," Management Science, INFORMS, vol. 59(2), pages 485-503, June.
    10. Zeng, Yan & Wu, Huiling & Lai, Yongzeng, 2013. "Optimal investment and consumption strategies with state-dependent utility functions and uncertain time-horizon," Economic Modelling, Elsevier, vol. 33(C), pages 462-470.
    11. Wei-Ting Pan, 2016. "The Impact of Mandatory Savings on Life Cycle Consumption and Portfolio Choice," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 32.
    12. Ljudmila A. Bordag & Ivan P. Yamshchikov, 2015. "Optimization problem for a portfolio with an illiquid asset: Lie group analysis," Papers 1512.06295, arXiv.org.
    13. Martin B. Haugh & Leonid Kogan & Jiang Wang, 2003. "Evaluating Portfolio Policies: A Duality Approach," NBER Working Papers 9861, National Bureau of Economic Research, Inc.
    14. Henderson, Vicky, 2005. "Explicit solutions to an optimal portfolio choice problem with stochastic income," Journal of Economic Dynamics and Control, Elsevier, vol. 29(7), pages 1237-1266, July.

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