Rentier strategy of optimal consumption. 

Krystyna Jaworska 

Military University of Technology (WAT), Kaliskiego 2, Warszawa 00-908, Poland


I’m going to study a continuous time stochastic model of optimal consumption plan.

An agent invests his capital W0 in some financial instrument. The instantaneous rate of return r(t) of this instrument is given by stochastic fractional differential equation. During persistence of the investment our rentier consumes part of his wealth. Therefore the dynamic of wealth process W(t) is described by the following equation   

W’(t) = W(t)r(t) – c(t), 

where c(t) is a consumption rate process. The point is to choose optimal consumption strategy with respect to power utility function u(x) = xa,  0<a<1.

 I’ll present in my talk the properties of the solution of the stochastic control problem mentioned above.


Related papers
  1. Modelling of Short Term Interest Rate Based on Fractional Relaxation Equation
  2. The Asymptotic Dependence of Elliptic Random Variables

Presentation: Oral at 4 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych", by Krystyna Jaworska
See On-line Journal of 4 Ogólnopolskie Sympozjum "Fizyka w Ekonomii i Naukach Społecznych"

Submitted: 2009-03-08 23:38
Revised:   2009-06-07 00:48