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Author (up) Reus, L.; Fabozzi, F.J. doi  openurl
  Title Robust Solutions to the Life-Cycle Consumption Problem Type Journal Article
  Year Publication Computational Economics Abbreviated Journal Comput. Econ.  
  Volume Issue Pages 19 pp  
  Keywords Life-cycle consumption problem; Intertemporal portfolio-choice problem; Robust optimization; Robust counterpart framework  
  Abstract This paper demonstrates how the well-known discrete life-cycle consumption problem (LCP) can be solved using the Robust Counterpart (RC) formulation technique, as defined in Ben-Tal and Nemirovski (Math Oper Res 23(4):769-805, 1998). To do this, we propose a methodology that involves applying a change of variables over the original consumption before deriving the RC. These transformations allow deriving a closed solution to the inner problem, and thus to solve the LCP without facing the curse of dimensionality and without needing to specify the prior distribution for the investment opportunity set. We generalize the methodology and illustrate how it can be used to solve other type of problems. The results show that our methodology enables solving long-term instances of the LCP (30 years). We also show it provides an alternative consumption pattern as to the one provided by a benchmark that uses a dynamic programming approach. Rather than finding a consumption that maximizes the expected lifetime utility, our solution delivers higher utilities for worst-case scenarios of future returns.  
  Address [Reus, Lorenzo] Univ Adolfo Ibanez, Engn & Sci, Diagonal Torres 2640, Santiago, Chile, Email: lorenzo.reus@uai.cl;  
  Corporate Author Thesis  
  Publisher Springer Place of Publication Editor  
  Language English Summary Language Original Title  
  Series Editor Series Title Abbreviated Series Title  
  Series Volume Series Issue Edition  
  ISSN 0927-7099 ISBN Medium  
  Area Expedition Conference  
  Notes WOS:000560958000001 Approved yes  
  Call Number UAI @ alexi.delcanto @ Serial 1222  
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