We study the consumption and portfolio selection problem of an agent who faces consumption irreversibility: there is disutility from changing consumption levels. The derived preference exhibits intertemporal loss aversion toward consumption changes with the previous consumption level being the...

This paper studies the investment timing problem of an entrepreneur with a non- tradable real option with undiversifiable risk. We find that the time preference can have a significant impact on the risk attitude toward the idiosyncratic risk, which re- sults from the wealth effect on the implied...

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...