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Hyperbolic Discounting and Life-Cycle Portfolio Choice

Love, David A. - 2016

This paper studies how hyperbolic discounting affects stock market participation, asset allocation, and saving … decisions over the life cycle in an economy with Epstein-Zin preferences. Hyperbolic discounting affects saving and portfolio … discounting on all of the model's decision rules and simulated levels of participation, allocation, and wealth. Finally, we …

Persistent link: https://www.econbiz.de/10012983233

How Much Should Life-Cycle Investors Adapt Their Behavior When Confronted with Model Uncertainty?

Shen, Sally - 2016

uncertainty aversion parameter, which measures the investor's preference for robustness using econometric theory. I derive a …

Persistent link: https://www.econbiz.de/10012997223

How Much Should Life-Cycle Investors Adapt their Behavior when Confronted with Model Uncertainty?

Shen, Sally - 2015

uncertainty aversion parameter, which measures the investor's preference for robustness using econometric theory. I derive a …

Persistent link: https://www.econbiz.de/10013033028

Application of stochastic optimal control to financial market debt crises

Stein, Jerome L. - 2009

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Persistent link: https://www.econbiz.de/10003807893

Consumption-Portfolio Optimization with Recursive Utility in Incomplete Markets

Kraft, Holger - 2011

In an incomplete market we study the optimal consumption-portfolio decision of an investor with recursive preferences of Epstein-Zin type. Applying a classical dynamic programming approach, we formulate the associated Hamilton-Jacobi-Bellman equation and provide a suitable verification theorem....

Persistent link: https://www.econbiz.de/10013133474

Robust Consumption and Portfolio Choice for Time Varying Investment Opportunities

Liu, Hening - 2010

This paper examines a continuous-time intertemporal consumption and portfolio choice problem for an investor with recursive preferences. The investor worries about model misspecification and seeks robust decision rules. The expected excess return of a risky asset follows a mean-reverting...

Persistent link: https://www.econbiz.de/10013151564

'Ito's Lemma' and the Bellman Equation for Poisson Processes : An Applied View

Sennewald, Ken; Wälde, Klaus - 2021

Using the Hamilton-Jacobi-Bellman equation, we derive both a Keynes-Ramsey rule and a closed form solution for an optimal consumption-investment problem with labor income. The utility function is unbounded and uncertainty stems from a Poisson process. Our results can be derived because of the...

Persistent link: https://www.econbiz.de/10013317637

Effects of gainsharing provisions on the selection of a discount rate for a defined benefit pension plan

Rietz, Robert J.; Cronick, Evan; Mathers, Shelb; … - In: Risks : open access journal 5 (2017) 2, pp. 1-10

pension plan. The paper uses a traditional actuarial approach of discounting liabilities using the expected return of the …

Persistent link: https://www.econbiz.de/10011687299

Discounting trillions of dollars in pension obligations : a better alternative to using the expected return or risk-free rate

Woutersen, Tiemen - 2022

This paper proposes a new discount rate that pension funds can use to discount their future obligations. If the payouts of a pension fund depend on the return of the fund's assets, then neither the risk-free rate nor the expected return is an equitable way to discount future liabilities. Using...

Persistent link: https://www.econbiz.de/10013455812

Discounting trillions of dollars in pension obligations : a better alternative to using the expected return or risk-free rate

Woutersen, Tiemen - 2021

Persistent link: https://www.econbiz.de/10013259262