Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market
This paper studies an investment-consumption problem under inflation. The consumption price level, the prices of the available assets, and the coefficient of the power utility are assumed to be sensitive to the states of underlying economy modulated by a continuous-time Markovian chain. The definiti...
Saved in:
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2016-01-01
|
| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2016/9606497 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1832564602740670464 |
|---|---|
| author | Huiling Wu |
| author_facet | Huiling Wu |
| author_sort | Huiling Wu |
| collection | DOAJ |
| description | This paper studies an investment-consumption problem under inflation. The consumption price level, the prices of the available assets, and the coefficient of the power utility are assumed to be sensitive to the states of underlying economy modulated by a continuous-time Markovian chain. The definition of admissible strategies and the verification theory corresponding to this stochastic control problem are presented. The analytical expression of the optimal investment strategy is derived. The existence, boundedness, and feasibility of the optimal consumption are proven. Finally, we analyze in detail by mathematical and numerical analysis how the risk aversion, the correlation coefficient between the inflation and the stock price, the inflation parameters, and the coefficient of utility affect the optimal investment and consumption strategy. |
| format | Article |
| id | doaj-art-3f243ab1c8974a06be645dd69864f8bd |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2016-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-3f243ab1c8974a06be645dd69864f8bd2025-02-03T01:10:34ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2016-01-01201610.1155/2016/96064979606497Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching MarketHuiling Wu0China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, ChinaThis paper studies an investment-consumption problem under inflation. The consumption price level, the prices of the available assets, and the coefficient of the power utility are assumed to be sensitive to the states of underlying economy modulated by a continuous-time Markovian chain. The definition of admissible strategies and the verification theory corresponding to this stochastic control problem are presented. The analytical expression of the optimal investment strategy is derived. The existence, boundedness, and feasibility of the optimal consumption are proven. Finally, we analyze in detail by mathematical and numerical analysis how the risk aversion, the correlation coefficient between the inflation and the stock price, the inflation parameters, and the coefficient of utility affect the optimal investment and consumption strategy.http://dx.doi.org/10.1155/2016/9606497 |
| spellingShingle | Huiling Wu Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market Discrete Dynamics in Nature and Society |
| title | Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market |
| title_full | Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market |
| title_fullStr | Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market |
| title_full_unstemmed | Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market |
| title_short | Optimal Investment-Consumption Strategy under Inflation in a Markovian Regime-Switching Market |
| title_sort | optimal investment consumption strategy under inflation in a markovian regime switching market |
| url | http://dx.doi.org/10.1155/2016/9606497 |
| work_keys_str_mv | AT huilingwu optimalinvestmentconsumptionstrategyunderinflationinamarkovianregimeswitchingmarket |