Download or read book Lifetime Investment and Consumption with Recursive Preferences and Small Transaction Costs written by Yaroslav Melnyk and published by . This book was released on 2017 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article investigates the effects of small proportional transaction costs on lifetime consumption and portfolio decisions. The extant literature has focused on agents with additive utility; here, we argue that this is essentially without loss of generality at the leading order for small costs. To shed light on the effects of alternative risk preferences, we in turn perform a higher-order analysis for the archetype of non-additive preferences - the isoelastic recursive utilities proposed by Epstein and Zin.

Download or read book Lifetime Consumption Portfolio Choice Under Trading Constraints Recursive Preferences and Nontradeable Income written by Mark D. Schroder and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the lifetime consumption-portfolio problem in a competitive securities market with essentially arbitrary continuous price dynamics, a possibly nontradeable income stream, and convex constraints on the vector of market values of financial positions. (The setting extends Schroder and Skiadas, 2002, where the endowment is assumed tradeable and constraints are imposed in terms of wealth proportions.) For any utility function with a supergradient density, we develop the first-order conditions of optimality, a side-product being the characterization of a constrained notion of state-pricing. The methodology is applied to generalized continuous-time recursive utility, allowing for first and second-order risk-aversion that can depend on the risk source, reflecting the source's quot;ambiguity.quot; Within this class, we isolate a more tractable formulation in which preferences exhibit no wealth effects (an example being time-additive expected discounted exponential utility), and there is unrestricted trading in a money market and a suitably defined consol bond. In this case, we derive closed-form solutions for the optimal consumption and trading strategy in terms of the solution to a single constrained backward stochastic differential equation (BSDE), which in a Markovian setting maps to a PDE. Methodologically, we develop the utility gradient approach, but for the wealth-invariant case we also verify the solution using the dynamic programming approach, without having to assume a Markovian structure. Finally, we present a class of parametric examples in which the PDE characterizing the solution simplifies to a system of ordinary differential equations (of the Riccati type).

Download or read book Optimal Lifetime Consumption Portfolio Strategies Under Trading Constraints and Generalized Recursive Preferences written by Mark D. Schroder and published by . This book was released on 2006 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the lifetime consumption-portfolio problem in a competitive securities market with essentially arbitrary continuous price dynamics, and convex trading constraints (e.g., incomplete markets and short-sale constraints). Abstract first-order conditions of optimality are derived, based on a preference-independent notion of constrained state pricing. For homothetic generalized recursive utility, we derive closed-form solutions for the optimal consumption and trading strategy in terms of the solution to a single constrained BSDE. Incomplete market solutions are related to complete markets solutions with modified risk aversion towards non-marketed risk. Methodologically, we develop the utility gradient approach, but for the homothetic case we also verify the solution using the dynamic programming approach, without having to assume a Markovian structure. Finally, we present a class of parametric examples in which the BSDE characterizing the solution reduces to a system of Riccati equations.

Download or read book Optimal Investment and Consumption with Transaction Costs written by Steven E. Shreve and published by . This book was released on 1992 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: "A complete solution is provided to the infinite-horizon, discounted problem of optimal consumption and investment in a market with one stock, one money market (sometimes called a 'bond'), and proportional transaction costs. The utility function may be of the form c[superscript p]/p where p

Download or read book The General Structure of Optimal Investment and Consumption with Small Transaction Costs written by Jan Kallsen and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Consumption and Portfolio Choices with Transaction Cost written by Robindra Nath Mukherjee and published by . This book was released on 1972 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Investment with Transaction Costs and Stochastic Volatility Part II written by Maxim Bichuch and published by . This book was released on 2018 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this companion paper to “Optimal Investment with Transaction Costs and Stochastic Volatility Part I: Infinite Horizon”, "http://ssrn.com/abstract=2374150" http://ssrn.com/abstract=2374150, we give an accuracy proof for the finite time optimal investment and consumption problem under fast mean-reverting stochastic volatility of a joint asymptotic expansion in a time scale parameter and the small transaction cost. The supplemental appendix accompanies this paper is, available at "http://ssrn.com/abstract=3234374" http://ssrn.com/abstract=3234374, in which we prove the verification theorem that the value function is a viscosity solution of the HJB equation.

Download or read book The Role of Consumption and Listed Alternative Investments on the Lifetime Ruin Probability of U S Households written by Juliane Proelss and published by . This book was released on 2009 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: In light of the current subprime and financial crises, retirement planning has gained in importance. Many U.S. households have had to reevaluate their assets and their retirement plans (if they even had plans). Most U.S. households, however, find it difficult to assess their retirements and the attendant risks properly. Households that have noticed a need for action often fail to fully evaluate the effectiveness of any potential actions.In this article we propose to solve the problem for different U.S. households: middle class, upper-middle class and upper class by estimating the risk to be alive when the financial portfolio falls short (life-time ruin probability). We further consider a reduction in consumption as well as portfolio diversification in listed alternative investments and its effect on the reduction of life-time ruin risk. The complex model we employ accounts for the stochastic total wealth accumulation including income, consumption, housing, debt, and saving dynamics (after inflation, tax, and transaction costs).We find that the life-time ruin probability for all considered households is unacceptably high: For the middle class even 75%, and still 54% for the upper class. But, the risk of portfolio ruin can be substantially reduced if the household is willing to decrease living expenses by 30% and diversifies in a naiquest;ve diversified portfolio of listed alternative investments by 30%, even if we account for the financial crisis. Finally we find that the middle class households must reassess their living expenses in the short run since it can only reduce lifetime ruin risk to 25% even if it takes all suggested action. In comparison the middle class and upper-middle class can reduce its lifetime-ruin risk to a reasonable 14% and 12.6%, which can be further decreased with a professional financial planning of the liquid (financial) assets.

Download or read book On an Investment consumption Model with Transaction Costs written by Institut National de Recherche en Informatique et en Automatique and published by . This book was released on 1993 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Investment and Consumption with Fixed and Proportional Transaction Costs written by Hong Liu and published by . This book was released on 2009 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the optimal investment and consumption policy for a constant absolute risk averse investor who faces fixed and/or proportional transaction costs when trading a stock and maximizes his expected utility from intertemporal consumption. We show that the Hamilton-Jacobi-Bellman PDE with free boundaries can be reduced to an ODE, which greatly simpli es the problem. Using the stochastic impulse and singular control techniques, we then derive the optimal investmment and consumption policy. In particular, when there are both fixed and proportional costs, it is shown that the optimal stock investment policy is to keep the dollar amount invested in the stock between two constant levels and upon reaching these two thresholds, the investor jumps to the corresponding optimal target level. We also provide detailed analysis of the optimal policy.

Download or read book Investment consumption Model with Transaction Costs and Markov chain Parameters written by Thaleia Zariphopoulou and published by . This book was released on 1989 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Handbook of the Economics of Finance written by G. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.

Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.

Download or read book Missing Data Methods written by David M. Drukker and published by Emerald Group Publishing. This book was released on 2011-11-30 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt: Part of the "Advances in Econometrics" series, this title contains chapters covering topics such as: Missing-Data Imputation in Nonstationary Panel Data Models; Markov Switching Models in Empirical Finance; Bayesian Analysis of Multivariate Sample Selection Models Using Gaussian Copulas; and, Consistent Estimation and Orthogonality.

Download or read book Handbook of the Fundamentals of Financial Decision Making written by Leonard C. MacLean and published by World Scientific. This book was released on 2013 with total page 941 pages. Available in PDF, EPUB and Kindle. Book excerpt: This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).

Download or read book Recursive Macroeconomic Theory written by Lars Ljungqvist and published by MIT Press. This book was released on 2004 with total page 1120 pages. Available in PDF, EPUB and Kindle. Book excerpt: A significant new edition of a text that offers both tools and sample applications; extensive revisions and seven new chapters improve and expand upon the original treatment.

Download or read book Dimensions of Environmental and Ecological Economics written by Nirmal Chandra Sahu and published by Universities Press. This book was released on 2005 with total page 616 pages. Available in PDF, EPUB and Kindle. Book excerpt: Besides Covering The Paradigamatic Bases Of Environmental, Ecological And Natural Resource Economics, This Book Discusses The Economic Dimensions Of And Approaches To Pollution, Environmental And Ecosystem Management, Biodiversity, Global Warming, Energy And Resource Use, And Sustainable Development.