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Minimizing the probability of lifetime ruin under stochastic volatility
Authors:Erhan Bayraktar  Xueying Hu Virginia R Young
Institution:
  • Department of Mathematics, University of Michigan, 530 Church Street, Ann Arbor, MI 48104, USA
  • Abstract:We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter’s price following a diffusion with stochastic volatility. Given the rate of consumption, we find the optimal investment strategy for the individual who wishes to minimize the probability of going bankrupt. To solve this minimization problem, we use techniques from stochastic optimal control.
    Keywords:Optimal investment  Minimizing the probability of lifetime ruin  Stochastic volatility
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