Legendre transform-dual solution for a class of investment and consumption problems with HARA utility

DOI10.1155/2014/656438MaRDI QIDQ1718893zbMATH OpenOpenAlexWikidataFDO

Authors Hao Chang, Ximin Rong

Publication date 8 February 2019

Published in Mathematical Problems in Engineering (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2014/656438

Mathematics Subject Classification ID

Portfolio theory (91G10) Financial applications of other theories (91G80) Optimal stochastic control (93E20)

Review text

Summary: This paper provides a Legendre transform method to deal with a class of investment and consumption problems, whose objective function is to maximize the expected discount utility of intermediate consumption and terminal wealth in the finite horizon. Assume that risk preference of the investor is described by hyperbolic absolute risk aversion (HARA) utility function, which includes power utility, exponential utility, and logarithm utility as special cases. The optimal investment and consumption strategy for HARA utility is explicitly obtained by applying dynamic programming principle and Legendre transform technique. Some special cases are also discussed.

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Cites work

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Cited in

(10)

• Optimal portfolio and consumption rule with a CIR model under HARA utility
• A solvable time-inconsistent principal-agent problem
• Optimal consumption and portfolios with the hyperbolic absolute risk aversion preference under the CEV model
• Optimal consumption-investment strategy under the vasicek model: HARA utility and Legendre transform
• Optimal consumption and investment for exponential utility function
• Inter‐temporal mutual‐fund management
• The Legendre transform-dual-asymptotic solution for optimal investment strategy with random incomes
• Optimal Management of the Collective Defined Contribution Pension Plan With Long-Term Care Insurance
• Optimal life-cycle consumption and investment decisions under age-dependent risk preferences
• Legendre transform-dual solution for investment and consumption problem under the Vasicek model

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