Optimal Consumption-Investment Decisions Allowing for Bankruptcy: A Brief Survey

Suresh Sethi

Chapter Chapter 23 in Markov Processes and Controlled Markov Chains, 2002, pp 371-387 from Springer

Abstract: Abstract This paper surveys the research on the optimal consumption and investment problem of an agent who is subject to bankruptcy that has a specified utility (reward or penalty). The bankruptcy utility, modelled by a parameter, may be the result of welfare subsidies, the agent’s innate ability to recover from bankruptcy, psychic costs associated with bankruptcy, etc. Models with nonnegative consumption, positive subsistence consumption, risky assets modelled by geometric Brownian motion or semi-martingales are discussed. The paper concludes with suggestions for open research problems.

Keywords: Risk Aversion; Mutual Fund; Risky Asset; Relative Risk Aversion; Absolute Risk Aversion (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4613-0265-0_23

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DOI: 10.1007/978-1-4613-0265-0_23

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