Please use this identifier to cite or link to this item: http://repositorio.inesctec.pt/handle/123456789/3695
Title: Optimal life insurance purchase, consumption and investment on a financial market with multi-dimensional diffusive terms
Authors: Duarte,I
Pinheiro,D
Alberto Pinto
Pliska,SR
Issue Date: 2014
Abstract: We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the income to purchase life insurance in order to provide for his estate, while investing his savings in a financial market comprised of one risk-free security and an arbitrary number of risky securities driven by multi-dimensional Brownian motion. We then provide a detailed analysis of the optimal consumption, investment and insurance purchase strategies for the wage earner whose goal is to maximize the expected utility obtained from his family consumption, from the size of the estate in the event of premature death, and from the size of the estate at the time of retirement. We use dynamic programming methods to obtain explicit solutions for the case of discounted constant relative risk aversion utility functions and describe new analytical results which are presented together with the corresponding economic interpretations.
URI: http://repositorio.inesctec.pt/handle/123456789/3695
http://dx.doi.org/10.1080/02331934.2012.665054
metadata.dc.type: article
Publication
Appears in Collections:LIAAD - Articles in International Journals

Files in This Item:
File Description SizeFormat 
P-009-Q8N.pdf467.35 kBAdobe PDFView/Open


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.