In this study, we generalize the results of Arun (2013) on the optimal consumption and investment problem of an infinitely lived agent who does not accept her consumption falling below a fixed proportion of her historically highest level, the so-called drawdown constraint on consumption. We...

In this study, we investigate an optimal consumption and investment problem of an economic agent who faces a welfare constraint; the agent does not accept her expected utility (continuation value) falls below a certain fixed level regardless of the time and state. This optimization problem...

We study the consumption and investment model under time-varying liquidity constraints (TVLC) that are widely used in reality. We first develop a martingale method to analyze the case in which the borrowing limit is specified by the debt-to-income ratio limit and then extend this framework to...

This paper studies a continuous-time optimal consumption and portfolio selection problem when an economic agent with recursive utility has stochastic income and liquidity constraints. To tackle this problem, we introduce a transform of the Hamilton-Jacobi-Bellman equation into a free boundary...