Optimally Investing to Reach a Bequest Goal

Erhan Bayraktar and Virginia R. Young

Papers from arXiv.org

Abstract: We determine the optimal strategy for investing in a Black-Scholes market in order to maximize the probability that wealth at death meets a bequest goal $b$, a type of goal-seeking problem, as pioneered by Dubins and Savage (1965, 1976). The individual consumes at a constant rate $c$, so the level of wealth required for risklessly meeting consumption equals $c/r$, in which $r$ is the rate of return of the riskless asset. Our problem is related to, but different from, the goal-reaching problems of Browne (1997). First, Browne (1997, Section 3.1) maximizes the probability that wealth reaches $b

Date: 2015-03, Revised 2016-05
New Economics Papers: this item is included in nep-mfd and nep-upt
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Citations: View citations in EconPapers (10)

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Journal Article: Optimally investing to reach a bequest goal (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1503.00961

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