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Article: Optimal investment-consumption strategy in a discrete-time model with regime switching

TitleOptimal investment-consumption strategy in a discrete-time model with regime switching
Authors
KeywordsBankruptcy risk
Bellman equation
Dynamic programming
Optimal investment-consumption strategy
Recovery rate
Second-order stochastic dominance
Stochastically monotone
Issue Date2007
PublisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at http://www.aimsciences.org/dcdsB.htm
Citation
Discrete And Continuous Dynamical Systems - Series B, 2007, v. 8 n. 2, p. 315-332 How to Cite?
AbstractThis paper analyzes the investment-consumption problem of a risk averse investor in discrete-time model. We assume that the return of a risky asset depends on the economic environments and that the economic environments are ranked and described using a Markov chain with an absorbing state which represents the bankruptcy state. We formulate the investor's decision as an optimal stochastic control problem. We show that the optimal investment strategy is the same as that in Cheung and Yang [5], and a closed form expression of the optimal consumption strategy has been obtained. In addition, we investigate the impact of economic environment regime on the optimal strategy. We employ some tools in stochastic orders to obtain the properties of the optimal strategy.
Persistent Identifierhttp://hdl.handle.net/10722/83003
ISSN
2015 Impact Factor: 1.227
2015 SCImago Journal Rankings: 1.111
References

 

DC FieldValueLanguage
dc.contributor.authorKa, CCen_HK
dc.contributor.authorHailiang, Yen_HK
dc.date.accessioned2010-09-06T08:35:50Z-
dc.date.available2010-09-06T08:35:50Z-
dc.date.issued2007en_HK
dc.identifier.citationDiscrete And Continuous Dynamical Systems - Series B, 2007, v. 8 n. 2, p. 315-332en_HK
dc.identifier.issn1531-3492en_HK
dc.identifier.urihttp://hdl.handle.net/10722/83003-
dc.description.abstractThis paper analyzes the investment-consumption problem of a risk averse investor in discrete-time model. We assume that the return of a risky asset depends on the economic environments and that the economic environments are ranked and described using a Markov chain with an absorbing state which represents the bankruptcy state. We formulate the investor's decision as an optimal stochastic control problem. We show that the optimal investment strategy is the same as that in Cheung and Yang [5], and a closed form expression of the optimal consumption strategy has been obtained. In addition, we investigate the impact of economic environment regime on the optimal strategy. We employ some tools in stochastic orders to obtain the properties of the optimal strategy.en_HK
dc.languageengen_HK
dc.publisherAmerican Institute of Mathematical Sciences. The Journal's web site is located at http://www.aimsciences.org/dcdsB.htmen_HK
dc.relation.ispartofDiscrete and Continuous Dynamical Systems - Series Ben_HK
dc.subjectBankruptcy risken_HK
dc.subjectBellman equationen_HK
dc.subjectDynamic programmingen_HK
dc.subjectOptimal investment-consumption strategyen_HK
dc.subjectRecovery rateen_HK
dc.subjectSecond-order stochastic dominanceen_HK
dc.subjectStochastically monotoneen_HK
dc.titleOptimal investment-consumption strategy in a discrete-time model with regime switchingen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1531-3492&volume=8&spage=315&epage=332&date=2007&atitle=Optimal+Investment-Consumption+Strategy+in+a+Discrete-Time+Model+with+Regime+Switchingen_HK
dc.identifier.emailKa, CC: kccg@hku.hken_HK
dc.identifier.authorityKa, CC=rp00677en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-35248901908en_HK
dc.identifier.hkuros142928en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-35248901908&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume8en_HK
dc.identifier.issue2en_HK
dc.identifier.spage315en_HK
dc.identifier.epage332en_HK
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridKa, CC=10038874000en_HK
dc.identifier.scopusauthoridHailiang, Y=23007946200en_HK

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