Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/239502 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 14 [Issue:] 2 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-27
Publisher: 
MDPI, Basel
Abstract: 
In the present paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting, a context that gives rise to time-inconsistency of the decision-maker. We consider equilibrium policies within the class of open-loop controls that are characterized, in our context, by means of a variational method which leads to a stochastic system that consists of a flow of forward-backward stochastic differential equations and an equilibrium condition. An explicit representation of the equilibrium policies is provided for the special cases of power, logarithmic and exponential utility functions.
Subjects: 
equilibrium strategies
investment-consumption problem
Merton portfolio problem
non-exponential discounting
stochastic maximum principle
stochastic optimization
time inconsistency
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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