Open AccessOptimal consumption problem in the Vasicek model
Author(s) -
Jakub Trybuła
Publication year - 2015
Publication title -
opuscula mathematica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.481
H-Index - 16
eISSN - 2300-6919
pISSN - 1232-9274
DOI - 10.7494/opmath.2015.35.4.547
Subject(s) - vasicek model , mathematics , consumption (sociology) , statistics , economics , interest rate , social science , sociology , monetary economics
We consider the problem of an optimal consumption strategy on the infinite time horizon based on the hyperbolic absolute risk aversion utility when the interest rate is an Ornstein-Uhlenbeck process. Using the method of subsolution and supersolution we obtain the existence of solutions of the dynamic programming equation. We illustrate the paper with a numerical example of the optimal consumption strategy and the value function
Accelerating Research
Robert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom
Address
John Eccles HouseRobert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom