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University of Michigan at Ann Arbor, Gu Wang, Consumption in Incomplete Markets

(发布于:2015-07-20 )

主讲人:Gu Wang (University of Michigan at Ann Arbor)

题:Consumption in Incomplete Markets

主持人:经济数学学院 马敬堂教授

间:2015722日(星期三) 上午:10:00




Gu Wang received his Ph.D. in Mathematics from Boston University in 2013 and now serves as a Postdoctoral Assistant Professor in University of Michigan at Ann Arbor. He will join Worcester Polytechnic Institute as a Tenure Track Assistant Professor in September 2015. Dr. Wang's research focuses on Portfolio Optimization and Stochastic Control Problems.


An agent maximizes isoelastic utility from consumption with infinite horizon in an incomplete market, in which state variables are driven by diffusions. We first provide a general verification theorem, which links the solution of the Hamilton-Jacobi-Bellman equation to the optimal consumption and investment policies. To tackle the intractability of such problems, we propose approximate policies, which admit an upper bound, in closed-form for their utility loss. These policies are optimal for an artificial complete market, in which the safe rate and the state variable follow different dynamics, but excess returns remain the same. The approximate policies have closed form solutions in common models, and become optimal if the market is complete, or utility is logarithmic.