The Library
Sensitivity of optimal consumption streams
Tools
Tools
Tools
Herdegen, Martin and Muhle-Karbe, Johannes (2019) Sensitivity of optimal consumption streams. Stochastic Processes and their Applications, 129 (6). pp. 1964-1992. doi:10.1016/j.spa.2018.06.011 ISSN 0304-4149.
|
PDF
WRAP-sensitivity-optimal-consumption-streams-Herdegen-2018.pdf - Accepted Version - Requires a PDF viewer. Available under License Creative Commons Attribution Non-commercial No Derivatives 4.0. Download (993Kb) | Preview |
Official URL: https://doi.org/10.1016/j.spa.2018.06.011
Abstract
We study the sensitivity of optimal consumption streams with respect to perturbations of the random endowment. At the leading order, the consumption adjustment does not matter: any choice that matches the budget constraint simply shifts the original utility by the marginal value of the perturbation. Nontrivial results can be obtained by considering the next-to-leading order. Here, one first solves the problem for a deterministic perturbation, which leads to a "prognosis measure''. The desired consumption adjustment for a general endowment perturbation is in turn given by the conditional expectation of the latter, computed under this measure and appropriately weighted with the conditional expectations of the remaining risk-tolerance.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HB Economic Theory | ||||||||
| Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||||
| Library of Congress Subject Headings (LCSH): | Consumption (Economics), Investments, Perturbation (Mathematics), Econometrics -- Asymptotic theory | ||||||||
| Journal or Publication Title: | Stochastic Processes and their Applications | ||||||||
| Publisher: | Elsevier Science BV | ||||||||
| ISSN: | 0304-4149 | ||||||||
| Official Date: | June 2019 | ||||||||
| Dates: |
|
||||||||
| Volume: | 129 | ||||||||
| Number: | 6 | ||||||||
| Page Range: | pp. 1964-1992 | ||||||||
| DOI: | 10.1016/j.spa.2018.06.011 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 4 July 2018 | ||||||||
| Date of first compliant Open Access: | 23 October 2018 | ||||||||
| RIOXX Funder/Project Grant: |
|
||||||||
| Related URLs: |
Request changes or add full text files to a record
Repository staff actions (login required)
 |
View Item |
Downloads
Downloads per month over past year
