- An optimal investment problem with randomly terminating income
- Amsterdam: Universiteit van Amsterdam
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
- We investigate an optimal consumption and investment problem where we receive a certain fixed income stream that is terminated at a random time. It turns out that the optimal strategy and the value function for this problem differ considerably from the case where our income stream is certain to continue indefinitely. More specifically, the optimal consumption policy involves a function that is not analytic around the point that represents zero wealth.
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