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Sensitivity of Optimal Retirement Problem to Liquidity Constraints

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  • Guodong Ding
  • Daniele Marazzina

Abstract

In this work we analytically solve an optimal retirement problem, in which the agent optimally allocates the risky investment, consumption and leisure rate to maximise a gain function characterised by a power utility function of consumption and leisure, through the duality method. We impose different liquidity constraints over different time spans and conduct a sensitivity analysis to discover the effect of this kind of constraint.

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  • Guodong Ding & Daniele Marazzina, 2021. "Sensitivity of Optimal Retirement Problem to Liquidity Constraints," Papers 2108.09035, arXiv.org.
    • Handle: RePEc:arx:papers:2108.09035
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    References listed on IDEAS

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    1. Guodong Ding & Daniele Marazzina, 2021. "Effect of Labour Income on the Optimal Bankruptcy Problem," Papers 2106.15426, arXiv.org.
    2. Farhi, Emmanuel & Panageas, Stavros, 2007. "Saving and investing for early retirement: A theoretical analysis," Journal of Financial Economics, Elsevier, vol. 83(1), pages 87-121, January.
    3. Kyoung Jin Choi & Gyoocheol Shim & Yong Hyun Shin, 2008. "Optimal Portfolio, Consumption‐Leisure And Retirement Choice Problem With Ces Utility," Mathematical Finance, Wiley Blackwell, vol. 18(3), pages 445-472, July.
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