Optimal investment-consumption and life insurance selection problem under inflation. A BSDE approach
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Publication:4639142
DOI10.1080/02331934.2017.1405956zbMATH Open1397.91554arXiv1711.01760OpenAlexW2963325871MaRDI QIDQ4639142FDOQ4639142
Authors: Calisto Guambe, Rodwell Kufakunesu 
Publication date: 3 May 2018
Published in: Optimization (Search for Journal in Brave)
Abstract: We discuss an optimal investment, consumption and insurance problem of a wage earner under inflation. Assume a wage earner investing in a real money account and three asset prices, namely: a real zero coupon bond, the inflation-linked real money account and a risky share described by jump-diffusion processes. Using the theory of quadratic-exponential backward stochastic differential equation (BSDE) with jumps approach, we derive the optimal strategy for the two typical utilities (exponential and power) and the value function is characterized as a solution of BSDE with jumps. Finally, we derive the explicit solutions for the optimal investment in both cases of exponential and power utility functions for a diffusion case.
Full work available at URL: https://arxiv.org/abs/1711.01760
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Portfolio theory (91G10) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)
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Cited In (5)
- A backwards stochastic differential equation model in life insurance
- Robust portfolio choice for a DC pension plan with inflation risk and mean-reverting risk premium under ambiguity
- Optimal consumption, portfolio, and life insurance policies under interest rate and inflation risks
- Optimal mean-variance efficiency of a family with life insurance under inflation risk
- An ergodic BSDE risk representation in a jump-diffusion framework
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