We solve analytically the Merton's problem of an investor with time-additive power utility. For general state dynamics, we prove existence of two power series representations of the relevant optimal policies and value functions, which hold for all admissible risk aversion parameters. We...

In this paper we solve an intertemporal portfolio problem with correlation risk, using a new approach for the simultaneous modeling of stochastic correlation and volatility. The solutions of the model are in closed form and include an optimal portfolio demand for hedging correlation risk. We...