Optimal consumption and portfolio selection with lower and upper bounds on consumption

[摘要] We investigate the optimal consumption and investment problem with lower and upper bounds on consumption constraints. We derive closed-form solutions by means of the dynamic programming approach. We also evaluate the effects of the optimal consumption and portfolio on consumption constraints and present some numerical/economic implications. In particular, we see that the upper bound on consumption acts as a bliss level in a quadratic utility model.

[学科分类] 航空航天科学

[关键词] Consumption constraints;Consumption/Investment problem;CRRA utility;Dynamic programming approach