Optimal lifetime consumption and investment under a drawdown constraint
Touzi, Nizar; Elie, Romuald (2008), Optimal lifetime consumption and investment under a drawdown constraint, Finance and Stochastics, 12, 3, p. 299-330. http://dx.doi.org/10.1007/s00780-008-0066-8
TypeArticle accepté pour publication ou publié
Journal nameFinance and Stochastics
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Abstract (EN)We consider the infinite-horizon optimal consumption-investment problem under a drawdown constraint, i.e., when the wealth process never falls below a fixed fraction of its running maximum. We assume that the risky asset is driven by the with constant coefficients. For a general class of utility functions, we provide the value function in explicit form and derive closed-form expressions for the optimal consumption and investment strategy.
Subjects / KeywordsVerification; Duality; Drawdown constraint; Portfolio allocation
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