Risk averse asymptotics in a Black–Scholes market on a finite time horizon |
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Authors: | Peter Grandits Stefan Thonhauser |
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Institution: | 1.Institute for Mathematical Methods in Economics,TU Vienna,Vienna,Austria;2.Institute of Actuarial Science,University of Lausanne,Lausanne,Switzerland |
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Abstract: | We consider the optimal investment and consumption problem in a Black–Scholes market, if the target functional is given by
expected discounted utility of consumption plus expected discounted utility of terminal wealth. We investigate the behaviour
of the optimal strategies, if the relative risk aversion tends to infinity. It turns out that the limiting strategies are:
do not invest at all in the stock market and keep the rate of consumption constant! |
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Keywords: | |
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