Household consumption, investment and life insurance
This paper develops a continuous-time Markov model for utility optimization of households. The household optimizes expected future utility from consumption by controlling consumption, investments and purchase of life insurance for each person in the household. The optimal controls are investigated in the special case of a two-person household, and we present graphics illustrating how differences between the two persons affect the controls.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kraft, Holger & Steffensen, Mogens, 2008. "Optimal Consumption and Insurance: A Continuous-time Markov Chain Approach," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 38(01), pages 231-257, May.
- 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.
- R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jay H. Hong & JosÃ©-VÃctor RÃos-Rull, 2012. "Life Insurance and Household Consumption," American Economic Review, American Economic Association, vol. 102(7), pages 3701-3730, December.
- Jay H. Hong & Jose-Victor Rios-Rull, 2004. "Life insurance and household consumption," Working Papers 04-10, Federal Reserve Bank of Philadelphia.
- Richard, Scott F., 1975. "Optimal consumption, portfolio and life insurance rules for an uncertain lived individual in a continuous time model," Journal of Financial Economics, Elsevier, vol. 2(2), pages 187-203, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:48:y:2011:i:3:p:315-325. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.