An investment and consumption problem for quadratic utility function in an incomplete market

Author

Chang, Hao ; Chang, Kai

Author_Institution

Dept. of Math., Tianjin Polytech. Univ., Tianjin, China

fYear

2012

fDate

23-25 May 2012

Firstpage

2039

Lastpage

2042

Abstract

This paper is concerned with an investment and consumption problem in an incomplete market and takes quadratic utility function for our analysis. We firstly transform an incomplete market into complete one and derive the optimal investment and consumption strategy in the completed market by applying dynamic programming and Hamilton-Jacobi-Bellman(HJB) equation. Finally, a closed-form solution in an incomplete market is obtained according to the parameters relationship between the completed market and the original incomplete one.

Keywords

dynamic programming; investment; marketing; stock markets; utility theory; HJB equation; Hamilton-Jacobi-Bellman equation; closed form solution; consumption problem; consumption strategy; dynamic programming; financial market; incomplete market; optimal investment; original incomplete market; quadratic utility function; Dynamic programming; Economics; Equations; Investments; Mathematical model; Portfolios; Stochastic processes; HJB equation; dynamic programming; incomplete market; investment and consumption; quadratic utility;

fLanguage

English

Publisher

ieee

Conference_Titel

Control and Decision Conference (CCDC), 2012 24th Chinese

Conference_Location

Taiyuan

Print_ISBN

978-1-4577-2073-4

Type

conf

DOI

10.1109/CCDC.2012.6243027

Filename

6243027