Minimizing the Probability of Lifetime Ruin under Random Consumption

Erhan Bayraktar, Kristen Moore and Virginia Young

North American Actuarial Journal, 2008, vol. 12, issue 4, 384-400

Abstract: We determine the optimal investment strategy in a financial market for an individual whose random consumption is correlated with the price of a risky asset. Bayraktar and Young consider this problem and show that the minimum probability of lifetime ruin is the unique convex, smooth solution of its corresponding Hamilton-Jacobi-Bellman equation. In this paper we focus on determining the probability of lifetime ruin and the corresponding optimal investment strategy. We obtain approximations for the probability of lifetime ruin for small values of certain parameters and demonstrate numerically that they are reasonable ones. We also obtain numerical results in cases for which those parameters are not small.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2008.10597531 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:12:y:2008:i:4:p:384-400

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2008.10597531

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().