Consumption processes and positively homogeneous projection properties

DOI10.1007/S00780-008-0064-XzbMATH Open1164.91013arXiv0711.4225OpenAlexW2127102357MaRDI QIDQ1003347FDOQ1003347

Authors: Tom Fischer 

Publication date: 28 February 2009

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: We constructively prove the existence of time-discrete consumption processes for stochastic money accounts that fulfill a pre-specified positively homogeneous projection property (PHPP) and let the account always be positive and exactly zero at the end. One possible example is consumption rates forming a martingale under the above restrictions. For finite spaces, it is shown that any strictly positive consumption strategy with restrictions as above possesses at least one corresponding PHPP and could be constructed from it. We also consider numeric examples under time-discrete and -continuous account processes, cases with infinite time horizons and applications to income drawdown and bonus theory.

Full work available at URL: https://arxiv.org/abs/0711.4225

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zbMATH Keywords

positive homogeneityConsumption strategiesincome drawdown[https://portal.mardi4nfdi.de/w/index.php?title=+Special%3ASearch&search=log-L%EF%BF%BD%EF%BF%BDvy+processes&go=Go log-L��vy processes]martingale consumptionsmooth bonus

Mathematics Subject Classification ID

Stochastic systems and control (93E99)

Cites Work

• Optimum consumption and portfolio rules in a continuous-time model
• Optimal Portfolio and Consumption Decisions for a “Small Investor” on a Finite Horizon
• Optimal consumption and portfolio policies when asset prices follow a diffusion process

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