An Application of Dynamic Programming Principle in Corporate International Optimal Investment and Consumption Choice Problem

Zongyuan Huang and Zhen Wu

Mathematical Problems in Engineering, 2010, vol. 2010, 1-16

Abstract:

This paper is concerned with a kind of corporate international optimal portfolio and consumption choice problems, in which the investor can invest her or his wealth either in a domestic bond (bank account) or in an oversea real project with production. The bank pays a lower interest rate for deposit and takes a higher rate for any loan. First, we show that Bellman's dynamic programming principle still holds in our setting; second, in terms of the foregoing principle, we obtain the investor's optimal portfolio proportion for a general maximizing expected utility problem and give the corresponding economic analysis; third, for the special but nontrivial Constant Relative Risk Aversion (CRRA) case, we get the investors optimal investment and consumption solution; last but not least, we give some numerical simulation results to illustrate the influence of volatility parameters on the optimal investment strategy.

Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/MPE/2010/472867.pdf (application/pdf)
http://downloads.hindawi.com/journals/MPE/2010/472867.xml (text/xml)

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:hin:jnlmpe:472867

DOI: 10.1155/2010/472867

Access Statistics for this article

More articles in Mathematical Problems in Engineering from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().