Unrestricted consumption under a deterministic wealth and an Ornstein-Uhlenbeck process as a discount rate

DOI10.1080/15326349.2017.1392867MaRDI QIDQ4643635zbMATH OpenOpenAlexWikidataFDO

Authors Julia Eisenberg

Publication date 28 May 2018

Published in Stochastic Models (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/1603.07622

zbMATH Keywords

Ornstein-Uhlenbeck processHamilton-Jacobi-Bellman equationoptimal controlconsumptionshort rate

Mathematics Subject Classification ID

Consumer behavior, demand theory (91B42) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Dynamic programming in optimal control and differential games (49L20) Optimal stochastic control (93E20)

Abstract: We consider an individual or household endowed with an initial capital and an income, modeled as a linear function of time. Assuming that the discount rate evolves as an Ornstein-Uhlenbeck process, we target to find an unrestricted consumption strategy such that the value of the expected discounted consumption is maximized. Differently than in the case with restricted consumption rates, we can determine the optimal strategy and the value function.

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Cites work

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Cited in

(4)

• Optimising dividends and consumption under an exponential CIR as a discount factor
• A note on optimal consumption and investment in a geometric Ornstein-Uhlenbeck market
• Optimal dividend of compound Poisson process under a stochastic interest rate
• scientific article; zbMATH DE number 2104200 (Why is no real title available?)

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