Optimal Consumption and Investment with a Wealth-Dependent Time-Varying Investment Opportunity
نویسندگان
چکیده
We study an optimization problem of an investor in which there is a better investment opportunity when he is rich than when he is poor. We model the betterment of the investment opportunity by considering an exogenously specified wealth threshold such that the investor’s investment opportunity is better when his wealth is above the threshold than when it is below the threshold. We derive a closed form solution for the optimal consumption and investment strategies by using a dynamic programming method, and investigate the effects of the potential investment opportunity changes on the optimal strategies.
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تاریخ انتشار 2015