An Integral Equation Representation for Optimal Retirement Strategies in Portfolio Selection Problem

Junkee Jeon (), Hyeng Keun Koo (), Yong Hyun Shin () and Zhou Yang ()
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Junkee Jeon: Kyung Hee University
Hyeng Keun Koo: Ajou University
Yong Hyun Shin: Sookmyung Women’s University
Zhou Yang: South China Normal University

Computational Economics, 2021, vol. 58, issue 3, No 14, 885-914

Abstract: Abstract In this paper we study the consumption and portfolio selection problem of a finitely-lived economic agent with an early retirement option, that is, the agent can choose her/his early retirement time before a mandatory retirement time. Based on the theoretical results in Yang and Koo (Math Oper Res, 43(4):1378–1404, 2018), we derive an integral equation satisfied by the optimal retirement boundary or free boundary using the Mellin transform technique. We also derive integral equation representations for the optimal consumption-portfolio strategies and the optimal wealth process. By using the recursive integration method, we obtain the numerical solutions for the integral equations and discuss economic implications for the optimal retirement strategies by using numerical solutions.

Keywords: Portfolio selection; Mandatory retirement; Early retirement; Free boundary; Mellin transform; Integral equation (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10614-020-10056-8

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