Optimally investing to reach a bequest goal

Erhan Bayraktar and Virginia R. Young

Insurance: Mathematics and Economics, 2016, vol. 70, issue C, 1-10

Abstract: We determine the optimal strategy for investing in a Black–Scholes market in order to maximize the probability that wealth at death meets a bequest goal b, a type of goal-seeking problem, as pioneered by Dubins and Savage (1965, 1976). The individual consumes at a constant rate c, so the level of wealth required for risklessly meeting consumption equals c/r, in which r is the rate of return of the riskless asset.

Keywords: Bequest motive; Consumption; Optimal investment; Stochastic control (search for similar items in EconPapers)
JEL-codes: C61 G02 G11 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Working Paper: Optimally Investing to Reach a Bequest Goal (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:70:y:2016:i:c:p:1-10

DOI: 10.1016/j.insmatheco.2016.05.015

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