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General closed-form solutions to the dynamic optimization problem in incomplete markets

Moawia, Alghalith (2009): General closed-form solutions to the dynamic optimization problem in incomplete markets.

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Abstract

In this paper, we provide general closed-form solutions to the incomplete-market random-coefficient dynamic optimization problem without the restrictive assumption of exponential or HARA utility function. Moreover, we explicitly express the optimal portfolio as a function of the optimal consumption and show the impact of optimal consumption on the optimal portfolio.

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