Personal finance and life insurance under separation of risk aversion and elasticity of substitution (Q2347056)

In a continuous time framework, the authors study the optimal consumption, investment and life insurance decision of an investor with remaining uncertain lifetime \(T\) who has a power utility function, access to a classical Black-Scholes market and insurance contracts with a life insurance company.\newline A verification theorem is proven for an equilibrium control. Also, in the special case without mortality risk, it is shown that the optimization approach chosen is equivalent to the recursive utility optimization with Epstein-Zin preferences in the sense that two approaches lead to the same result. So, the applied optimization approach can be seen as a generalization of recursive utility optimization with Epstein-Zin preferences, where mortality risk and life insurance are included.