Dynamic Saving and Portfolio Decisions-Theory

Carl Chiarella, Willi Semmler, Chih-Ying Hsiao and Lebogang Mateane
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Chih-Ying Hsiao: University of Technology

Chapter Chapter 4 in Sustainable Asset Accumulation and Dynamic Portfolio Decisions, 2016, pp 53-79 from Springer

Abstract: Abstract In this chapter, we illustrate the use of dynamic programming (DP) and the HJB equation for a simple model. We focus on dynamic saving and asset allocation, formulated in continuous time. We first introduce a model with one asset and constant returns. Usually in the literature, the problem is formulated as consumption and asset allocation decision. In this context, the objective of the investor is then to maximize his or her welfare given by some preferences over consumption, resulting in corresponding saving rates affecting the size of the assets.

Keywords: Interest Rate; Discount Rate; Risk Aversion; Asset Return; Asset Allocation (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-662-49229-1_4

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DOI: 10.1007/978-3-662-49229-1_4

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