There exists one potential source which has not obtained full treatment in the recent consumption literature: a negative wealth constraint (NWC). An economic agent who faces the NWC can borrow up to a certain proportion of the present value of labor income. We present an analytically tractable...

We develop a new dynamic continuous-time model of optimal consumption and investment to include independent stochastic labor income. We reduce the problem of solving the Bellman equation to a problem of solving an integral equation. We then explicitly characterize the optimal consumption and...

In this paper we study asset demands and consumption of an individual at the end of her life cycle. We present an ideal market where complete insurance against longevity risk is available: the market consists of original assets, e.g., stocks and bonds, and annuities and life-insurance contracts...