Infinite-horizon investment consumption model with a nonterminal bankruptcy |
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| Authors: | S. Sethi M. Taksar |
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| Affiliation: | (1) Faculty of Management, University of Toronto, Toronto, Ontario, Canada;(2) Department of Applied Mathematics and Statistics, State University of New York at Stony Brook, Stony Brook, New York |
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| Abstract: | This paper solves a general continuous-time consumption and portfolio decision problem for a single agent for whom there exists, upon bankruptcy, a possibility of recovery from his bankruptcy. The main contribution of the paper is in the modeling of the recovery process. Moreover, it is shown that the model with recovery has a one-to-one correspondence with the model with terminal bankruptcy treated in the literature.This research was supported by Grants SSHRC-410-83-9888 and NSERC-A4619 to the first author and by Grants NSF-DMS-86-01510 and AFOSR-88-0183 to the second author. Comments from E. Presman are gratefully acknowledged. |
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| Keywords: | Consumption and investment bankruptcy infinite-horizon problems diffusion with delayed reflection stochastic optimal control |
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