OPTIMAL INVESTMENT CONSUMPTION MODEL WITH A HIGHER INTEREST RATE FOR BORROWING

This paper considers a consumption and investment decision problem with a higher interest rate for borrowing as well as the dividend rate.Wealth is divided into a riskless asset and risky asset with logrithmic Brownian motion price fluctuations.The stochastic control problem of maximizating expected utility from terminal wealth and consumption is studied.Equivalent conditions for optimality are obtained.By using duality methods,the existence of optimal portfolio consumption is proved,and the explicit solutions leading to feedback formulae are derived for deteministic coefficients.

LEGENDRE TRANSFORM-DUAL SOLUTION FOR INVESTMENT AND CONSUMPTION PROBLEM UNDER THE VASICEK MODEL

This paper studies an investment and consumption problem with stochastic interest rate,where interest rate is governed by the Vasicek model.The financial market is composed of one riskfree asset and one risky asset,in which stock price dynamics is assumed to be generally correlated with interest rate dynamics.The aim is to maximize expected utility of consumption and terminal wealth in the finite horizon.Legendre transform is used to deal with this investment and consumption problem and the explicit solutions of the optimal investment and consumption strategies with power and logarithm preference are achieved.Finally,the authors add a numerical example to analyze the effect of market parameters on the optimal investment and consumption strategy and provide some economic implications.

STOCHASTIC PROGRAMMING METHOD FOR MULTIPERIOD CONSUMPTION AND INVESTMENT PROBLEMS WITH TRANSACTIONS COSTS

Using the GARCH model to describe the risky asset's return process so thatits time-varying moments and conditional heteroskedasticity can be properly reflected,general multiperiod optimal investment and consumption problems with both fixed andproportional transactions costs are investigated in this paper. We model this kind ofdifficult problems as a dynamic stochastic optimization problem, which can cope withdifferent utility functions and any number of time periods. The procedure to solve theresulting complex nonlinear stochastic optimization problem is discussed in detail and abranch-decomposition algorithm is devised.

Dual Control Methods for a Mixed Control Problem with Optimal Stopping Arising in Optimal Consumption and Investment

This paper studies a problem of optimal investment and consumption with early retirement option under constant elasticity variation(CEV)model with finite horizon.Two risky assets are involved in the model with one following geometric Brownian motion and the other a CEV model.This problem is a kind of two dimensional mixed control and optimal stopping problems with finite horizon.The existence and continuity of the optimal retirement threshold surfaces are proved and the working and retirement regions are characterized theoretically.Least-squares Monte-Carlo methods are developed to solve this mixed control and optimal stopping problem.The algorithms are well implemented and the optimal retirement threshold surfaces,optimal investment strategies and the optimal consumptions are drawn via examples.

Research on transformation and upgrading of traditional manufacturing industry under the background of reducing capacity

In today＇s economic situation, overcapacity of Chinese traditional manufacturing industry poses a serious threat to sustaineck rapid and healthy development of economy. The primary reasons of excess capacity of Chinese traditional manufacturing industry are the discordant between consumption and investment, the irrational industrial structure, export is not ideal and other causes. Overcapacity of traditional manufacturing industry will lead to business failures, unemployment citizen, deflation, financial risk and other series consequences. We should learn from foreign experience in the processing of excess capacity of traditional manufacturing industry and deal with excess capacity of traditional manufacturing industry in different aspects, so as to ensure stable and healthy development of our country＇ s economy.

Optimal consumption and portfolio selection with Epstein–Zin utility under general constraints

The paper investigates the consumption–investment problem for an investor with Epstein–Zin utility in an incomplete market.Closed but not necessarily convex constraints are imposed on strategies.The optimal consumption and investment strategies are characterized via a quadratic backward stochastic differential equation(BSDE).Due to the stochastic market environment,solutions to this BSDE are unbounded,so the BMO argument breaks down.After establishing the martingale optimality criterion and carefully selecting Lyapunov functions,the verification theorem is ultimately obtained.In addition,several examples and numerical simulations of optimal strategies are provided and illustrated.