Optimal consumption and investment in incomplete markets with general constraints

Patrick Cheridito and Ying Hu
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Patrick Cheridito: IRMAR
Ying Hu: IRMAR

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Abstract: We study an optimal consumption and investment problem in a possibly incomplete market with general, not necessarily convex, stochastic constraints. We give explicit solutions for investors with exponential, logarithmic and power utility. Our approach is based on martingale methods which rely on recent results on the existence and uniqueness of solutions to BSDEs with drivers of quadratic growth.

Date: 2010-10, Revised 2010-12
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1010.0080

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