Optimal Consumption and Investment with Bankruptcy

Authors: Sethi, Suresh P.

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About this book

This book presents papers on continuous-time consumption­ investment models by Suresh Sethi and various co-authors. Sir Isaac Newton said that he saw so far because he stood on the shoulders of gi­ ants. Giants upon whose shoulders Professor Sethi and colleagues stand are Robert Merton, particularly Merton's (1969, 1971, 1973) seminal papers, and Paul Samuelson, particularly Samuelson (1969). Karatzas, Lehoczky, Sethi and Shreve (1986), henceforth KLSS, re­ produced here as Chapter 2, reexamine the model proposed by Mer­ ton. KLSS use methods of modern mathematical analysis, taking care to prove the existence of integrals, check the existence and (where appro­ priate) the uniqueness of solutions to equations, etc. KLSS find that un­ der some conditions Merton's solution is correct; under others, it is not. In particular, Merton's solution for aHARA utility-of-consumption is correct for some parameter values and not for others. The problem with Merton's solution is that it sometimes violates the constraints against negative wealth and negative consumption stated in Merton (1969) and presumably applicable in Merton (1971 and 1973). This not only affects the solution at the zero-wealth, zero-consumption boundaries, but else­ where as well. Problems with Merton's solution are analyzed in Sethi and Taksar (1992), reproduced here as Chapter 3.

Table of contents (16 chapters)

  • Consumption/Investment Problems

    Sethi, Suresh P.

    Pages 3-18

  • Explicit Solution of a General Consumption/ Investment Problem

    Karatzas, Ioannis (et al.)

    Pages 21-56

  • A Note on Merton’s “Optimum Consumption and Portfolio Rules in a Continuous-Time Model”

    Sethi, Suresh P. (et al.)

    Pages 57-65

  • Infinite-Horizon Investment Consumption Model with a Nonterminal Bankruptcy

    Taksar, M. I.

    Pages 67-84

  • Risk-Aversion Behavior in Consumption/Investment Problems

    Presman, E. L.

    Pages 85-116

Buy this book

eBook $159.00
price for USA (gross)
  • ISBN 978-1-4615-6257-3
  • Digitally watermarked, DRM-free
  • Included format: PDF
  • ebooks can be used on all reading devices
  • Immediate eBook download after purchase
Hardcover $249.00
price for USA
  • ISBN 978-0-7923-9755-7
  • Free shipping for individuals worldwide
  • Usually dispatched within 3 to 5 business days.
Softcover $209.00
price for USA
  • ISBN 978-1-4613-7871-6
  • Free shipping for individuals worldwide
  • Usually dispatched within 3 to 5 business days.
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Bibliographic Information

Bibliographic Information
Book Title
Optimal Consumption and Investment with Bankruptcy
Authors
Copyright
1997
Publisher
Springer US
Copyright Holder
Springer Science+Business Media New York
eBook ISBN
978-1-4615-6257-3
DOI
10.1007/978-1-4615-6257-3
Hardcover ISBN
978-0-7923-9755-7
Softcover ISBN
978-1-4613-7871-6
Edition Number
1
Number of Pages
XX, 428
Topics