On Investment-Consumption With Regime-Switching

In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless account. The market coefficients and discount factor switches according to a finite state Markov chain. The change in the discount rate leads to time inconsistencies of the investor's decisions. The randomness in the authors' model is driven by a Brownian motion and Markov chain.

Provided by: McMaster University Topic: Big Data Date Added: Jul 2011 Format: PDF

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