Mutual fund theorems when minimizing the probability of lifetime ruin

Erhan Bayraktar and Virginia R. Young

Finance Research Letters, 2008, vol. 5, issue 2, 69-78

Abstract: We show that the mutual fund theorems of Merton [1971. Journal of Economic Theory 3, 373-413] extend to the problem of optimal investment to minimize the probability of lifetime ruin. We obtain two such theorems by considering a financial market both with and without a riskless asset for random consumption. The striking result is that we obtain two-fund theorems despite the additional source of randomness from consumption.

Date: 2008
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Working Paper: Mutual Fund Theorems when Minimizing the Probability of Lifetime Ruin (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:5:y:2008:i:2:p:69-78

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