Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5076369 | Insurance: Mathematics and Economics | 2016 | 12 Pages |
Abstract
We provide investment advice for an individual who wishes to minimize her lifetime poverty, with a penalty for bankruptcy or ruin. We measure poverty via a non-negative, non-increasing function of (running) wealth. Thus, the lower wealth falls and the longer wealth stays low, the greater the penalty. This paper generalizes the problems of minimizing the probability of lifetime ruin and minimizing expected lifetime occupation, with the poverty function serving as a bridge between the two. To illustrate our model, we compute the optimal investment strategies for a specific poverty function and two consumption functions, and we prove some interesting properties of those investment strategies.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Asaf Cohen, Virginia R. Young,