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A concise characterization of optimal consumption with logarithmic preferences

 
: Korn, R.

:

International journal of theoretical and applied finance 16 (2013), Nr.6, Art. 1350035, 7 S.
ISSN: 0219-0249 (Print)
ISSN: 1793-6322 (Online)
Englisch
Zeitschriftenaufsatz
Fraunhofer ITWM ()

Abstract
In a general semi-martingale financial market with possibly nonlinear wealth dynamics, incomplete information, and ambiguity, we show that the optimal consumption decision of an agent with logarithmic preferences can be separated from the agent's investment decisions. Using minimal assumptions and mathematical machinery, we demonstrate that the optimal consumption/wealth ratio is deterministic, and we derive an explicit formula for it.

: http://publica.fraunhofer.de/dokumente/N-311234.html