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Portfolio Optimization under Transaction Costs with Recursive Preferences
The Merton investment-consumption problem is fundamental, both in the field of finance, and in stochastic control.
Proper solutions for Epstein-Zin Stochastic Differential Utility
Finally, we solve the optimal investment-consumption problem in a constant parameter financial market, where we optimise over the right-continuous attainable consumption streams that have a unique proper utility process associated to them.
Callable convertible bonds under liquidity constraints and hybrid priorities
This paper investigates the callable convertible bond problem in the presence of a liquidity constraint modelled by Poisson signals.
The Infinite Horizon Investment-Consumption Problem for Epstein-Zin Stochastic Differential Utility
The paper has three main goals: first, to provide a detailed introduction to infinite-horizon Epstein-Zin stochastic differential utility, including a discussion of which parameter combinations lead to a well-formulated problem; second, to prove existence and uniqueness of infinite horizon Epstein-Zin stochastic differential utility under a restriction on the parameters governing the agent's risk aversion and temporal variance aversion; and third, to provide a verification argument for the candidate optimal solution to the investment-consumption problem among all admissible consumption streams.
An elementary approach to the Merton problem
In this article we consider the infinite-horizon Merton investment-consumption problem in a constant-parameter Black - Scholes - Merton market for an agent with constant relative risk aversion R. The classical primal approach is to write down a candidate value function and to use a verification argument to prove that this is the solution to the problem.
