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Optimal consumption, investment and life insurance selection under robust utilities

Author

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  • M. Ferreira

    (ISAG — European Business School and Research Center in Business Sciences and Tourism (CICET-FCVC), Campus de Salazares/Ramalde, R. de Salazares 842, 4100-442 Porto, Portugal2ISMAI — Universidade da Maia Av. Carlos de Oliveira Campos, 4475-690 Maia, Portugal)

  • D. Pinheiro

    (Department of Mathematics, Brooklyn College of the City University of New York, USA4Department of Mathematics, Graduate Center of the City University of New York, USA)

  • S. Pinheiro

    (Department of Mathematics and Computer Science, Queensborough Community College of the City University of New York, USA)

Abstract

We study the problem faced by a wage earner with an uncertain lifetime who has access to a Black–Scholes-type financial market consisting of one risk-free security and one risky asset. His preferences relative to consumption, investment and life insurance purchase are described by a robust expected utility. We rewrite this problem in terms of a two-player zero-sum stochastic differential game and we derive the wage earner optimal strategies for a general class of utility functions, studying the case of discounted constant relative risk aversion utility functions with more detail.

Suggested Citation

  • M. Ferreira & D. Pinheiro & S. Pinheiro, 2023. "Optimal consumption, investment and life insurance selection under robust utilities," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 1-28, September.
    • Handle: RePEc:wsi:ijfexx:v:10:y:2023:i:03:n:s2424786323500160
    DOI: 10.1142/S2424786323500160
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    Cited by:

    1. Estey, Clayton, 2024. "Robust Bellman State Prediction with Learning and Model Preferences," OSF Preprints 75fc9, Center for Open Science.

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