A consumption–investment problem with constraints on minimum and maximum consumption rates

A consumption–investment problem with constraints on minimum and maximum consumption rates We develop famous Merton’s financial model to more realistic and interesting situation: consumption rate has lower and upper constraints. The aim is to find optimal strategies for consumption and investment. The corresponding HJB equation is a fully nonlinear ordinary differential equation. We use stochastic analysis and differential equation technique to find optimal strategies. The regularity of the value function is obtained as well. The method and result are meaningful and interesting in both of finance and mathematics. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Computational and Applied Mathematics Elsevier

A consumption–investment problem with constraints on minimum and maximum consumption rates

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Publisher
Elsevier
Copyright
Copyright © 2018 Elsevier B.V.
ISSN
0377-0427
eISSN
1879-1778
D.O.I.
10.1016/j.cam.2018.02.006
Publisher site
See Article on Publisher Site

Abstract

We develop famous Merton’s financial model to more realistic and interesting situation: consumption rate has lower and upper constraints. The aim is to find optimal strategies for consumption and investment. The corresponding HJB equation is a fully nonlinear ordinary differential equation. We use stochastic analysis and differential equation technique to find optimal strategies. The regularity of the value function is obtained as well. The method and result are meaningful and interesting in both of finance and mathematics.

Journal

Journal of Computational and Applied MathematicsElsevier

Published: Aug 15, 2018

References

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