This paper provides a novel five-component decomposition of optimal dynamic portfolio choice. It reveals the simultaneous impacts from market incompleteness and wealth-dependent utilities. The decomposition leads to implementation via either closed-form solutions or Monte Carlo simulations. With...

An agent can distribute his wealth between two investments, one with a fixed rate of return r and the other with a random rate of return (modeled as a diffusion) with mean r. The agent seeks to maximize total discounted utility from consumption over an infinite horizon. Consumption may be...

This paper solves a general continuous-time consumption and portfolio decision problem for a single agent for whom there exists, upon bankruptcy, a possibility of recovery from his bankruptcy. The main contribution of the paper is in the modeling of the recovery process. Moreover, it is shown...

We consider optimal consumption and portfolio investment problems of an investor who is interested in maximizing his utilities from consumption and terminal wealth subject to a random inflation in the consumption basket price over time. We consider two cases: (i) when the investor observes the...

In this paper, we study the risk-aversion behavior of an agent in the dynamic framework of consumption/investment decision making that allows the possibility of bankruptcy. Agent's consumption utility is assumed to be represented by a strictly increasing, strictly concave, continuously...

We consider a general continuous-time finite-horizon single-agent consumption and portfolio decision problem with subsistence consumption and value of bankruptcy. Our analysis allows for random market coefficients and general continuously differentiable concave utility functions. We study the...

This paper solves a general consumption and investment decision problem in closed form. An investor seeks to maximize total expected discounted utility of consumption. There are N distinct risky investments, modeled by dependent geometric Brownian motion processes, and one risk-less...

We solve an agent's optimization problem of meeting demands for cash over time with cash deposited in bank or invested in stock. The stock pays dividends and uncertain capital gains, and a commission is incurred in buying and selling of stock. We use a stochastic maximum principle to obtain...

This paper surveys the research on optimal consumption and investment problem of an agent who is subject to bankruptcy that has a specified utility (reward or penalty). The bankruptcy utility, modeled by a parameter, may be the result of welfare subsidies, the agent's innnate ability to recover...

In this note we provide an explicit formula for the probability distribution function of the bankruptcy time in a general consumption/investment problem involving subsistence consumption and bankruptcy penalty