Optimal Portfolio of Corporate Investment and Consumption Problem under Market Closure: Inflation Case. (3rd June 2013)

• Record Type: Journal Article
• Authors: Huang, Zongyuan; Zhang, Detao
• Other Names: Wang Guangchen Academic Editor.
• Is Part Of: Mathematical problems in engineering. Volume 2013(2013)
• Publication Date: 2013-06-03
• Subjects: Engineering mathematics -- Periodicals; 510.2462
• DOI: 10.1155/2013/715869
• Languages: English
• ISSNs: 1024-123X

Abstract

Abstract : We present the model of corporate optimal investment with consideration of the influence of inflation and the difference between the market opening and market closure. In our model, the investor has three market activities of his or her choice: investment in project A, investment in project B, and consumption. The optimal strategy for the investor is obtained using the Hamilton-Jacobi-Bellman equation which is derived using the dynamic programming principle. Further along, a specific case, the Hyperbolic Absolute Risk Aversion case, is discussed in detail, where the explicit optimal strategy can be obtained using a very simple and direct method. At the very end, we present some simulation results along with a brief analysis of the relationship between the optimal strategy and other factors.