IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Minimizing the Probability of Lifetime Ruin under Stochastic Volatility

  • Erhan Bayraktar
  • Xueying Hu
  • Virginia R. Young

We 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. In the current financial market especially, it is important to include stochastic volatility in the risky asset's price process. 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Latest version
Download Restriction: no

Paper provided by in its series Papers with number 1003.4216.

in new window

Date of creation: Mar 2010
Date of revision: May 2011
Handle: RePEc:arx:papers:1003.4216
Contact details of provider: Web page:

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.:

as in new window
  1. Erhan Bayraktar & Virginia R. Young, 2007. "Proving Regularity of the Minimal Probability of Ruin via a Game of Stopping and Control," Papers 0704.2244,, revised Aug 2010.
  2. Erhan Bayraktar & Virginia R. Young, 2008. "Minimizing the Probability of Ruin when Consumption is Ratcheted," Papers 0806.2358,
  3. Moshe A. Milevsky & Kristen S. Moore & Virginia R. Young, 2006. "Asset Allocation And Annuity-Purchase Strategies To Minimize The Probability Of Financial Ruin," Mathematical Finance, Wiley Blackwell, vol. 16(4), pages 647-671.
  4. 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.
  5. 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.
  6. Mattias Jonsson & K. Ronnie Sircar, 2002. "Partial Hedging In A Stochastic Volatility Environment," Mathematical Finance, Wiley Blackwell, vol. 12(4), pages 375-409.
  7. Erhan Bayraktar & Virginia R. Young, 2007. "Optimal Deferred Life Annuities to Minimize the Probability of Lifetime Ruin," Papers math/0703862,, revised Oct 2007.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:arx:papers:1003.4216. 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: (arXiv administrators)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.