Abstract:
[NOTE: Text or symbols not renderable in plain text are indicated by [...]. See PDF document for full abstract.] In this dissertation, we consider a particular case of an optimal consumption and portfolio selection problem for an infinitely lived investor whose consumption rate process is subject to downside constraint. We also suppose that the wealth dynamics is composed of three assets (i) risklessassets (ii) risky assets (iii) hedge assets. We consider the investor's wealth process, interpreted in the sense of the Itô integral as [...]. Our work aims to find the optimal policies which maximize the expected discount utility function given by [...]. Furthermore, we obtain the optimal policies in an explicit form for the log utility function which is a special case (γ → 1) of the general utility(CRRA) function, using the martingale method and applying the Legendre transform formula and the Feynman-kac formula. We derive some numerical results for the optimal policies and illustrated graphically.
