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4306. Optimal consumption, investment, and insurance under state-dependent risk aversion
Invited abstract in session MB-57: Decision making in Insurance and Pensions, stream Modern Decision Making in Finance and Insurance.
Monday, 10:30-12:00Room: S06 (building: 101)
Authors (first author is the speaker)
| 1. | Mogens Steffensen
|
Abstract
We consider classes of dynamic decision problems where an investor maximizes utility but faces random preferences. We consider three versions of the problem. In one version, the investor optimizes expected utility where the expectation is taken with respect to both financial and preference uncertainty. That is based on Steffensen and Søe (2023). Another version is based on certainty equivalents. We tackle the time-consistency issues arising from that formulation by applying the equilibrium theory approach. The case where the investor learns nothing about his preferences as time passes is based on Desmettre and Steffensen (2023). We also discuss another case where risk aversion is an observed stochastic process.
References:
Desmettre, S., & Steffensen, M. (2023). Equilibrium investment with random risk aversion. Mathematical Finance, 33, 946–975. https://doi.org/10.1111/mafi.12394
Steffensen, M., & Søe, J. (2023). Optimal consumption, investment, and insurance under state-dependent risk aversion. ASTIN Bulletin: The Journal of the IAA, 53(1), 104-128. doi:10.1017/asb.2022.25
Keywords
- Financial Modelling
- Control Theory
- Continuous Optimization
Status: accepted
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