A consumption-investment problem modelled as a discounted Markov decision process

Title:

A consumption-investment problem modelled as a discounted Markov decision process

Creator:

Cruz-Suárez, Hugo, Montez-de-Oca, Raúl, and Zacarías, Gabriel

Identifier:

https://cdk.lib.cas.cz/client/handle/uuid:1ece7a5a-7c83-4f01-99e6-99137f44c581
uuid:1ece7a5a-7c83-4f01-99e6-99137f44c581

Subject:

discounted Markov decision processes, differentiable value function, differentiable optimal policy, stochastic Euler equation, and consumption and investment problems

Type:

model:article and TEXT

Format:

bez média and svazek

Description:

In this paper a problem of consumption and investment is presented as a model of a discounted Markov decision process with discrete-time. In this problem, it is assumed that the wealth is affected by a production function. This assumption gives the investor a chance to increase his wealth before the investment. For the solution of the problem there is established a suitable version of the Euler Equation (EE) which characterizes its optimal policy completely, that is, there are provided conditions which guarantee that a policy is optimal for the problem if and only if it satisfies the EE. The problem is exemplified in two particular cases: for a logarithmic utility and for a Cobb-Douglas utility. In both cases explicit formulas for the optimal policy and the optimal value function are supplied.

Language:

English

Rights:

http://creativecommons.org/publicdomain/mark/1.0/
policy:public

Coverage:

[909]-929

Source:

Kybernetika | 2011 Volume:47 | Number:6

Harvested from:

CDK

Metadata only:

false