Three assets model for portfolio selection under a constrained consumption rate process

[NOTE: Text or symbols not renderable in plain text are indicated by [...]. See PDF document for full abstract.] In this dissertation, we consider a particular case of an optimal consumption and portfolio selection problem for an infinitely lived investor whose consumption rate process is subject to downside constraint. We also suppose that the wealth dynamics is composed of three assets (i) risklessassets (ii) risky assets (iii) hedge assets. We consider the investor's wealth process, interpreted in the sense of the Itô integral as [...]. Our work aims to find the optimal policies which maximize the expected discount utility function given by [...]. Furthermore, we obtain the optimal policies in an explicit form for the log utility function which is a special case (γ → 1) of the general utility(CRRA) function, using the martingale method and applying the Legendre transform formula and the Feynman-kac formula. We derive some numerical results for the optimal policies and illustrated graphically.

Grantor dc:publisher

University of Alabama Libraries

Year dc:date.issued

2009

Author dc:creator

• Thagunna, Karan Singh

Advisor dc:contributor.advisor

• Wu, Zhijian

Contributors dc:contributor

• Neggers, Joseph
• Lee, Junsoo
• Hadji, Layachi
• Wang, Patrick P.

• Mathematics

Statement dc:rights

• All rights reserved by the author unless otherwise indicated.

Language dc:language.iso

en_US, English

Dc Identifier Other

u0015_0000001_0000129
Thagunna_alatus_0004D_10211

OAI identifier oai:identifier

oai:ir.ua.edu:123456789/636