Mutual fund theorems when minimizing the probability of lifetime ruin

We show that the mutual fund theorems of Merton [1971. Journal of Economic Theory 3, 373-413] extend to the problem of optimal investment to minimize the probability of lifetime ruin. We obtain two such theorems by considering a financial market both with and without a riskless asset for random consumption. The striking result is that we obtain two-fund theorems despite the additional source of randomness from consumption.

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Year of publication:	2008
Authors:	Bayraktar, Erhan ; Young, Virginia R.
Published in:	Finance Research Letters. - Elsevier, ISSN 1544-6123. - Vol. 5.2008, 2, p. 69-78
Publisher:	Elsevier

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005397410