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...

This paper produces a comprehensive theory of the value of Bayesian information and its static demand. Our key insight is to assume 'natural units' corresponding to the sample size of conditionally i.i.d. signals - focusing on the smooth nearby model of the precision of an observation of a...

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...