Optimization problem under change of regime of interest rate

Bogdan Iftimie, Monique Jeanblanc, Thomas Lim and Hai-Nam Nguyen
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Bogdan Iftimie: IMAR
Monique Jeanblanc: DP
Thomas Lim: ENSIIE

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Abstract: In this paper, we study the classical problem of maximization of the sum of the utility of the terminal wealth and the utility of the consumption, in a case where a sudden jump in the risk-free interest rate creates incompleteness. The value function of the dual problem is proved to be solution of a BSDE and the duality between the primal and the dual value functions is exploited to study the BSDE associated to the primal problem.

Date: 2013-05
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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