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General closed-form solutions to the dynamic optimization problem in incomplete markets

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  • Moawia, Alghalith

Abstract

In this paper, we provide general closed-form solutions to the incomplete-market random-coefficient dynamic optimization problem without the restrictive assumption of exponential or HARA utility function. Moreover, we explicitly express the optimal portfolio as a function of the optimal consumption and show the impact of optimal consumption on the optimal portfolio.

Suggested Citation

  • Moawia, Alghalith, 2009. "General closed-form solutions to the dynamic optimization problem in incomplete markets," MPRA Paper 19313, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19313
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    References listed on IDEAS

    as
    1. Jaksa Cvitanic & Fernando Zapatero, 2004. "Introduction to the Economics and Mathematics of Financial Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532654, December.
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    More about this item

    Keywords

    portfolio; incomplete markets; stochastic; dynamic; investment; consumption;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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