Author: Nils H. Hakansson
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Book Description
In a previous paper, the author presented a normative model of the individual's economic decision problem under risk. This model is now extended to include the case in which the individual has an uncertain life-time, a bequest motive, and the opportunity to enter into contracts of insurance. Optimal investment and consumption strategies are derived, where possible, for the class of utility functions whose proportional risk aversion indices are constants, and their properties are noted. In consequence of one of these properties, it is shown that the model gives rise to an induced theory of the firm under risk, which may be viewed as an extension of the theory developed for the case in which the horizon is certain. In addition, it is found that when the premium charged is 'fair, ' any given individual may be able to make himself better off both by the purchase of insurance on his own life and the sale of insurance on the lives of others. (Author).
Optimal Investment and Consumption Strategies Under Risk, and Uncertain Lifetime, and Insurance
Author: Nils H. Hakansson
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Book Description
In a previous paper, the author presented a normative model of the individual's economic decision problem under risk. This model is now extended to include the case in which the individual has an uncertain life-time, a bequest motive, and the opportunity to enter into contracts of insurance. Optimal investment and consumption strategies are derived, where possible, for the class of utility functions whose proportional risk aversion indices are constants, and their properties are noted. In consequence of one of these properties, it is shown that the model gives rise to an induced theory of the firm under risk, which may be viewed as an extension of the theory developed for the case in which the horizon is certain. In addition, it is found that when the premium charged is 'fair, ' any given individual may be able to make himself better off both by the purchase of insurance on his own life and the sale of insurance on the lives of others. (Author).
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Book Description
In a previous paper, the author presented a normative model of the individual's economic decision problem under risk. This model is now extended to include the case in which the individual has an uncertain life-time, a bequest motive, and the opportunity to enter into contracts of insurance. Optimal investment and consumption strategies are derived, where possible, for the class of utility functions whose proportional risk aversion indices are constants, and their properties are noted. In consequence of one of these properties, it is shown that the model gives rise to an induced theory of the firm under risk, which may be viewed as an extension of the theory developed for the case in which the horizon is certain. In addition, it is found that when the premium charged is 'fair, ' any given individual may be able to make himself better off both by the purchase of insurance on his own life and the sale of insurance on the lives of others. (Author).
Optimal Investment and Consumption Strategies for a Class of Utility Functions
Author: Nils Hemming Hakansson
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 262
Book Description
Publisher:
ISBN:
Category : Capital
Languages : en
Pages : 262
Book Description
Optimal Investment and Consumption Strategy for a Retiree Under Stochastic Force of Mortality
Author: Kanav Gupta
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
With an increase in the self-driven retirement plans during past few decades, more and more retirees are managing their retirement portfolio on their own. Therefore, they need to know the optimal amount of consumption they can afford each year, and the optimal proportion of wealth they should invest in the financial market. In this project, we study the optimization strategy proposed by Delong and Chen (2016). Their model determines the optimal consumption and investment strategy for a retiree facing (1) a minimum lifetime consumption, (2) a stochastic force of mortality following a geometric Brownian motion process, (3) an annuity income, and (4) non-exponential discounting of future income. We use a modified version of the Cox, Ingersoll, and Ross (1985) model to capture the stochastic mortality intensity of the retiree and, subsequently, determine a new optimal consumption and investment strategy using their framework. We use an expansion method to solve the classic Hamilton-Jacobi-Bellman equation by perturbing the non-exponential discounting parameter using partial differential equations.
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Book Description
With an increase in the self-driven retirement plans during past few decades, more and more retirees are managing their retirement portfolio on their own. Therefore, they need to know the optimal amount of consumption they can afford each year, and the optimal proportion of wealth they should invest in the financial market. In this project, we study the optimization strategy proposed by Delong and Chen (2016). Their model determines the optimal consumption and investment strategy for a retiree facing (1) a minimum lifetime consumption, (2) a stochastic force of mortality following a geometric Brownian motion process, (3) an annuity income, and (4) non-exponential discounting of future income. We use a modified version of the Cox, Ingersoll, and Ross (1985) model to capture the stochastic mortality intensity of the retiree and, subsequently, determine a new optimal consumption and investment strategy using their framework. We use an expansion method to solve the classic Hamilton-Jacobi-Bellman equation by perturbing the non-exponential discounting parameter using partial differential equations.
Strategic Financial Planning Over the Lifecycle
Author: Narat Charupat
Publisher: Cambridge University Press
ISBN: 0521764564
Category : Business & Economics
Languages : en
Pages : 383
Book Description
This is a final-year college level textbook on personal finance, jointly written by business school and mathematics professors. It is aimed at a wide audience of people who are interested in wealth management from a more rigorous perspective. It may be used in both personal applications and professional classrooms.
Publisher: Cambridge University Press
ISBN: 0521764564
Category : Business & Economics
Languages : en
Pages : 383
Book Description
This is a final-year college level textbook on personal finance, jointly written by business school and mathematics professors. It is aimed at a wide audience of people who are interested in wealth management from a more rigorous perspective. It may be used in both personal applications and professional classrooms.
Optimal Investment and Financial Strategies Under Tax Rate Uncertainty
Optimal Life Insurance Purchase, Consumption and Portfolio Under an Uncertain Life
Portfolio Selection
Author: Harry Markowitz
Publisher: Yale University Press
ISBN: 0300013728
Category : Business & Economics
Languages : en
Pages : 369
Book Description
Embracing finance, economics, operations research, and computers, this book applies modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors.
Publisher: Yale University Press
ISBN: 0300013728
Category : Business & Economics
Languages : en
Pages : 369
Book Description
Embracing finance, economics, operations research, and computers, this book applies modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors.
Determinants of Life Insurance Consumption across Countries
Author: Thorsten Beck
Publisher: World Bank Publications
ISBN:
Category : Financial services industry
Languages : en
Pages : 50
Book Description
Publisher: World Bank Publications
ISBN:
Category : Financial services industry
Languages : en
Pages : 50
Book Description
Dynamic Programming and Stochastic Control
Author: Bertsekas
Publisher: Academic Press
ISBN: 0080956343
Category : Computers
Languages : en
Pages : 415
Book Description
Dynamic Programming and Stochastic Control
Publisher: Academic Press
ISBN: 0080956343
Category : Computers
Languages : en
Pages : 415
Book Description
Dynamic Programming and Stochastic Control
Kelly Capital Growth Investment Criterion, The: Theory And Practice
Author: Leonard C Maclean
Publisher: World Scientific
ISBN: 981446581X
Category : Business & Economics
Languages : en
Pages : 883
Book Description
This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.Contents: "The Early Ideas and Contributions: "Introduction to the Early Ideas and ContributionsExposition of a New Theory on the Measurement of Risk (translated by Louise Sommer) "(D Bernoulli)"A New Interpretation of Information Rate "(J R Kelly, Jr)"Criteria for Choice among Risky Ventures "(H A Latan‚)"Optimal Gambling Systems for Favorable Games "(L Breiman)"Optimal Gambling Systems for Favorable Games "(E O Thorp)"Portfolio Choice and the Kelly Criterion "(E O Thorp)"Optimal Investment and Consumption Strategies under Risk for a Class of Utility Functions "(N H Hakansson)"On Optimal Myopic Portfolio Policies, with and without Serial Correlation of Yields "(N H Hakansson)"Evidence on the ?Growth-Optimum-Model? "(R Roll)""Classic Papers and Theories: "Introduction to the Classic Papers and TheoriesCompetitive Optimality of Logarithmic Investment "(R M Bell and T M Cover)"A Bound on the Financial Value of Information "(A R Barron and T M Cover)"Asymptotic Optimality and Asymptotic Equipartition Properties of Log-Optimum Investment "(P H Algoet and T M Cover)"Universal Portfolios "(T M Cover)"The Cost of Achieving the Best Portfolio in Hindsight "(E Ordentlich and T M Cover)"Optimal Strategies for Repeated Games "(M Finkelstein and R Whitley)"The Effect of Errors in Means, Variances and Co-Variances on Optimal Portfolio Choice "(V K Chopra and W T Ziemba)"Time to Wealth Goals in Capital Accumulation "(L C MacLean, W T Ziemba, and Y Li)"Survival and Evolutionary Stability of Rule the Kelly "(I V Evstigneev, T Hens, and K R Schenk-Hopp‚)"Application of the Kelly Criterion to Ornstein-Uhlenbeck Processes "(Y Lv and B K Meister)""The Relationship of Kelly Optimization to Asset Allocation: "Introduction to the Relationship of Kelly Optimization to Asset AllocationSurvival and Growth with a Liability: Optimal Portfolio Strategies in Continuous Time "(S Browne)"Growth versus Security in Dynamic Investment Analysis "(L C MacLean, W T Ziemba, and G Blazenko)"Capital Growth with Security "(L C MacLean, R Sanegre, Y Zhao, and W T Ziemba)"
Publisher: World Scientific
ISBN: 981446581X
Category : Business & Economics
Languages : en
Pages : 883
Book Description
This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.Contents: "The Early Ideas and Contributions: "Introduction to the Early Ideas and ContributionsExposition of a New Theory on the Measurement of Risk (translated by Louise Sommer) "(D Bernoulli)"A New Interpretation of Information Rate "(J R Kelly, Jr)"Criteria for Choice among Risky Ventures "(H A Latan‚)"Optimal Gambling Systems for Favorable Games "(L Breiman)"Optimal Gambling Systems for Favorable Games "(E O Thorp)"Portfolio Choice and the Kelly Criterion "(E O Thorp)"Optimal Investment and Consumption Strategies under Risk for a Class of Utility Functions "(N H Hakansson)"On Optimal Myopic Portfolio Policies, with and without Serial Correlation of Yields "(N H Hakansson)"Evidence on the ?Growth-Optimum-Model? "(R Roll)""Classic Papers and Theories: "Introduction to the Classic Papers and TheoriesCompetitive Optimality of Logarithmic Investment "(R M Bell and T M Cover)"A Bound on the Financial Value of Information "(A R Barron and T M Cover)"Asymptotic Optimality and Asymptotic Equipartition Properties of Log-Optimum Investment "(P H Algoet and T M Cover)"Universal Portfolios "(T M Cover)"The Cost of Achieving the Best Portfolio in Hindsight "(E Ordentlich and T M Cover)"Optimal Strategies for Repeated Games "(M Finkelstein and R Whitley)"The Effect of Errors in Means, Variances and Co-Variances on Optimal Portfolio Choice "(V K Chopra and W T Ziemba)"Time to Wealth Goals in Capital Accumulation "(L C MacLean, W T Ziemba, and Y Li)"Survival and Evolutionary Stability of Rule the Kelly "(I V Evstigneev, T Hens, and K R Schenk-Hopp‚)"Application of the Kelly Criterion to Ornstein-Uhlenbeck Processes "(Y Lv and B K Meister)""The Relationship of Kelly Optimization to Asset Allocation: "Introduction to the Relationship of Kelly Optimization to Asset AllocationSurvival and Growth with a Liability: Optimal Portfolio Strategies in Continuous Time "(S Browne)"Growth versus Security in Dynamic Investment Analysis "(L C MacLean, W T Ziemba, and G Blazenko)"Capital Growth with Security "(L C MacLean, R Sanegre, Y Zhao, and W T Ziemba)"