Optimal investment, consumption and retirement decision with disutility and borrowing constraints

In this paper we consider a general consumption, portfolio and retirement optimization problem in which a working investor has borrowing constraints. Closed-form solutions are obtained for the utility maximization problems, and numerical procedures are given for the general utility function under bo...

Full description

Saved in:
Bibliographic Details
Published in:Quantitative finance 2011-10, Vol.11 (10), p.1581-1592
Main Authors: Lim, Byung Hwa, Shin, Yong Hyun
Format: Article
Language:English
Subjects:
Borrowing
Borrowing constraints
Consumption
Disutility
General utility function
Labor income
Portfolio investments
Portfolio selection
Retirement
Studies
Utility functions
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In this paper we consider a general consumption, portfolio and retirement optimization problem in which a working investor has borrowing constraints. Closed-form solutions are obtained for the utility maximization problems, and numerical procedures are given for the general utility function under borrowing constraints. Moreover, we apply the results to the special utility function, the constant relative risk-aversion utility function, and the numerical results suggest that the restriction to borrowing future labor income makes the investor retire at a lower critical wealth level than in the case of no borrowing constraints.
ISSN:1469-7688
1469-7696
DOI:10.1080/14697680903369526