Optimal Investment, Consumption and Life Insurance under Stochastic Interest Rate and Volatility
نویسندگان
چکیده
In this paper, we consider the problem of optimal investment, consumption and life insurance for a wage earner who has constant relative risk aversion(CRRA)preferences. The wage earner can invest in zero-coupon bond, stock and life insurance, and can make consumption decision. The interest rate and the volatility of the stock are stochastic, which results in incomplete market. Besides, the labor income is also stochastic, its increasing rate and the interest rate are cointegrated. We derive the optimal strategies of the problem by dynamic programming method and solving the associated HJB equations. We also present a sensitivity analysis to explore the impact of economical parameters on the optimal strategies. JEL Classifications: G11, G22, G32, C61, D52, D53. MSC: 91B16, 91G10, 91G30, 91B30. Submission Classifications: IE12, IE13, IE53, IE43, IE51, IM12, IB10.
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