Optimal Consumption, Investment, and Housing Choice: A Dynamic Programming Approach

We investigate a portfolio selection problem involving an agent’s realistic housing service choice, where the agent not only has to choose size of house live in, but also select between renting and purchasing house. Adopting dynamic programming approach, we derive closed-form solution obtain optimal policies for consumption, investment, service, time present various numerical demonstrations showing impacts parameters in financial markets preference, which visually show economic implications our model. Our model makes significant contribution because it is pioneering purchase house, been investigated depth existing mathematical optimization models.