Optimal investment and consumption strategies with state-dependent utility functions and uncertain time-horizon

Yan Zeng, Huiling Wu and Yongzeng Lai

Economic Modelling, 2013, vol. 33, issue C, 462-470

Abstract: This paper considers the multi-period optimal strategies for an investment-only problem and an investment–consumption problem. The financial market is regime-switching and consists of one risk-free asset and multiple risky assets. The state process of the financial market is modeled by a finite-state Markov chain. Asset returns and utility functions are affected by the states of the financial market. The investment time-horizon is uncertain and exogenous. By adopting the dynamic programming approach, explicit expressions for optimal value functions and optimal investment and consumption strategies are derived. Moreover, some discussions and numerical examples are provided to illustrate our results, which extend some results in the existing literature to more general situations and show some interesting phenomena.

Keywords: Optimal investment and consumption strategies; Multi-period model; Dynamic programming; Uncertain time-horizon; Regime-switching (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999313001867
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:33:y:2013:i:c:p:462-470

DOI: 10.1016/j.econmod.2013.04.044

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().