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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: portfolio, incomplete markets, stochastic, dynamic,investment, consumption
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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