LIFETIME CONSUMPTION AND INVESTMENT FOR WORST-CASE CRASH SCENARIOS

2015 ◽  
Vol 18 (01) ◽  
pp. 1550004 ◽  
Author(s):  
SASCHA DESMETTRE ◽  
RALF KORN ◽  
FRANK THOMAS SEIFRIED
Keyword(s):  
Portfolio Choice ◽  
Closed Form Solution ◽  
Form Solution ◽  
Optimal Consumption ◽  
Worst Case ◽  
Portfolio Decisions ◽  
Portfolio Strategy ◽  
Crash Exposure ◽  
The Impact

We investigate worst-case optimal consumption and portfolio decisions under the threat of a market crash on an infinite time horizon. We provide a closed-form solution for constant relative risk aversion and establish a rigorous verification result. More specifically, using martingale arguments we demonstrate that the optimal consumption-portfolio strategy can be characterized as the indifference strategy that achieves the best performance in the no-crash scenario. In addition, we find a dual characterization of the optimal strategy as the indifference strategy that minimizes the crash exposure. Finally, we quantify the impact of the crash on consumption and portfolio choice and analyze it in terms of the investor's risk and time preferences and prudence.

scholarly journals Optimal Consumption and Portfolio Choice: The Impact of Health and Health Risk

2021 ◽  
Vol 8 (2) ◽  
pp. 266-276
Author(s):  
You Du
Keyword(s):  
Health Risk ◽  
Portfolio Choice ◽  
Middle Age ◽  
Well Being ◽  
Optimal Consumption ◽  
Financial Assets ◽  
Health It ◽  
Portfolio Decisions ◽  
Age Profile ◽  
The Impact

This paper investigates the effect of health and health risk on households’ optimal consumption and portfolio allocations over the life cycle. The simulation results show that consumption, savings in bonds, and savings in stocks all increase in health. Compared with poor health households, the healthy households consume 49% higher, invest 27% and 39% more in bonds and in stocks, respectively. The risky portfolio share, which is the ratio of stocks to the total financial assets is positively related with health for most of the lifetime. Regarding the age profile, it demonstrates the same tendency for both health levels: at the very young age, the risky portfolio share is relatively high. Starting from the middle age, this share falls significantly and keeps steady until the end of life. These results emphasize the importance of health and its associated risk in consumption and portfolio decisions. With all other things equal, households’ consumption and investment behaviors are heterogenous across health. It also provides significant policy applications: by promoting health and reducing health risk, it would largely improve households’ well-being: higher consumption, and more savings in financial assets.

scholarly journals Income and Wealth Distribution in Macroeconomics: A Continuous-Time Approach

2021 ◽  
Author(s):  
Yves Achdou ◽  
Jiequn Han ◽  
Jean-Michel Lasry ◽  
Pierre-Louis Lions ◽  
Benjamin Moll
Keyword(s):  
Continuous Time ◽  
Wealth Distribution ◽  
Closed Form Solution ◽  
Form Solution ◽  
Heterogeneous Agent ◽  
Saving Behavior ◽  
Income And Wealth Distribution ◽  
Heterogeneous Agent Models ◽  
Special Case

Abstract We recast the Aiyagari-Bewley-Huggett model of income and wealth distribution in continuous time. This workhorse model – as well as heterogeneous agent models more generally – then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions. First, a number of new theoretical results: (i) an analytic characterization of the consumption and saving behavior of the poor, particularly their marginal propensities to consume; (ii) a closed-form solution for the wealth distribution in a special case with two income types; (iii) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one. Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including – but not limited to – the Aiyagari-Bewley-Huggett model.

scholarly journals On the impact of antenna diversity in IEEE 802.11b DCF with capture

2004 ◽  
Vol 17 (1) ◽  
pp. 41-52
Author(s):  
Zoran Velkov-Hadzi ◽  
Boris Spasenovski
Keyword(s):  
Closed Form ◽  
Closed Form Solution ◽  
Access Point ◽  
Form Solution ◽  
Capture Probability ◽  
Antenna Diversity ◽  
Ieee 802.11B ◽  
Selection Diversity ◽  
Maximum Selection ◽  
The Impact

In this paper, we examined the influence of capture effect with L-fold antenna diversity at the Access Point over IEEE 802.11b DCF. We obtained an exact closed-form solution for the conditional capture probability in case of ideal selection diversity, and an approximate closed-form solution for the conditional capture probability in case of maximum selection diversity in a Rayleigh-faded channel. Obtained analytical expressions have general significance and can be applied for any other multiple access wireless network. We also analytically evaluated saturation throughput increase of the IEEE 802.11b DCF protocol exposed to capture.

scholarly journals A Dynamic Game Approach for Demand-Side Management: Scheduling Energy Storage with Forecasting Errors

2019 ◽  
Vol 10 (4) ◽  
pp. 897-929 ◽  
Author(s):  
Matthias Pilz ◽  
Luluwah Al-Fagih
Keyword(s):  
Energy Storage ◽  
Closed Form Solution ◽  
Dynamic Game ◽  
Demand Side Management ◽  
Form Solution ◽  
Demand Side ◽  
Case Scenario ◽  
Worst Case ◽  
Time Dynamic ◽  
Forecasting Errors

AbstractSmart metering infrastructure allows for two-way communication and power transfer. Based on this promising technology, we propose a demand-side management (DSM) scheme for a residential neighbourhood of prosumers. Its core is a discrete time dynamic game to schedule individually owned home energy storage. The system model includes an advanced battery model, local generation of renewable energy, and forecasting errors for demand and generation. We derive a closed-form solution for the best response problem of a player and construct an iterative algorithm to solve the game. Empirical analysis shows exponential convergence towards the Nash equilibrium. A comparison of a DSM scheme with a static game reveals the advantages of the dynamic game approach. We provide an extensive analysis on the influence of the forecasting error on the outcome of the game. A key result demonstrates that our approach is robust even in the worst-case scenario. This grants considerable gains for the utility company organising the DSM scheme and its participants.

Analysis of Simply-Supported Orthotropic Cylindrical Shells Subject to Lateral Impact Loads

1990 ◽  
Vol 57 (2) ◽  
pp. 376-382 ◽  
Author(s):  
A. P. Christoforou ◽  
S. R. Swanson
Keyword(s):  
Cylindrical Shells ◽  
Closed Form Solution ◽  
Double Fourier Series ◽  
Form Solution ◽  
Lateral Impact ◽  
Simply Supported ◽  
Response Characteristics ◽  
Simple Support ◽  
The Impact ◽  
Approximate Procedure

An analytic solution is given for the problem of simply-supported orthotropic cylindrical shells subject to impact loading. The closed-form solution has not been obtained previously. The analysis is based on an expansion of the loads, displacements, and rotations in a double Fourier series which satisfies the end boundary conditions of simple support. Each expansion is assumed to be separable into a function of time and a function of position. By neglecting in-plane and rotary inertia the problem becomes a second-order ordinary differential equation in time for the Fourier coefficients of the radial deflection. For a given loading impulse the solution can be found by invoking the convolution integral. The results show that for impact by a heavy mass, the solution is equivalent to that obtained by an approximate procedure of neglecting the mass of the shell, which leads to a simple simple-degree-of-freedom analysis. For problems of impact by smaller masses, the higher response frequencies of the cylinder become important. The results show the importance of dynamic effects in the predicted impact duration, peak force, and peak deflection relative to the quasi-static response. The results show that the response amplitude varies linearly with the impact velocity, but the response characteristics depend on the mass of the impactor and the mass and stiffness of the cylinder.

A closed-form solution to eye-to-hand calibration towards visual grasping

2014 ◽  
Vol 41 (6) ◽  
pp. 567-574 ◽  
Author(s):  
Hui Pan ◽  
Na Li Wang ◽  
Yin Shi Qin
Keyword(s):  
Closed Form ◽  
Design Methodology ◽  
Closed Form Solution ◽  
Form Solution ◽  
Content Type ◽  
The Impact ◽  
Calibration Plane

Purpose – The purpose of this paper is to propose a method that calibrates the hand-eye relationship for eye-to-hand configuration and afterwards a rectification to improve the accuracy of general calibration. Design/methodology/approach – The hand-eye calibration of eye-to-hand configuration is summarized as a equation AX = XB which is the same as in eye-in-hand calibration. A closed-form solution is derived. To abate the impact of noise, a rectification is conducted after the general calibration. Findings – Simulation and actual experiments confirm that the accuracy of calibration is obviously improved. Originality/value – Only a calibration plane is required for the hand-eye calibration. Taking the impact of noise into account, a rectification is carried out after the general calibration and, as a result, that the accuracy is obviously improved. The method can be applied in many actual applications.

scholarly journals Portfolio choice with jumps: A closed-form solution

2009 ◽  
Vol 19 (2) ◽  
pp. 556-584 ◽  
Author(s):  
Yacine Aït-Sahalia ◽  
Julio Cacho-Diaz ◽  
T. R. Hurd
Keyword(s):  
Closed Form ◽  
Portfolio Choice ◽  
Closed Form Solution ◽  
Form Solution

scholarly journals Optimal control of an inventory system under whole sale price changes

2019 ◽  
Author(s):  
Ata Allah Taleizadeh ◽  
Hamidreza Zarei ◽  
Shib Sankar Sana
Keyword(s):  
Closed Form Solution ◽  
Form Solution ◽  
Price Changes ◽  
Total Saving ◽  
Ordering Policy ◽  
Decision Variables ◽  
Optimal Ordering Policy ◽  
Optimal Ordering ◽  
The Impact ◽  
Special Order

Nowadays business owners use lots of incentive schemes to make customers buy more products. In this paper optimal ordering policy for customers is obtained when the manufacturer increases the purchasing price or temporary decreases it. Offering a special sale from the manufacturer is probabilistic and shortage occurs as partial backlogging. In this paper, the initial level of inventory when the purchasing price changes is not equal to zero. With respect to the assumptions, the amount of special order quantity, the shortage quantity, and the expected total saving from making an special order is optimized for the customer. The optimal amount of decision variables are obtained by maximizing the expected total saving function and a closed-form solution is derived. Several numerical examples are solved and sensitivity analysis is performed to prove the applicability of the proposed model. Finally, the impact of some parameters of the model including the demand, the probability of making a special order, the future prices, and the initial inventory is investigated. Optimal ordering policy for the customers is obtained in cases when an announced price increase occurs and when the prices temporarily decrease.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

The one-side defaultable financial derivatives valuation problems have been studied extensively, but the valuation of bilateral derivatives with asymmetric credit qualities is still lacking convincing mechanism. This paper presents an analytical model for valuing derivatives subject to default by both counterparties. The default-free interest rates are modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

The one-side defaultable financial derivatives valuation problems have been studied extensively, but the valuation of bilateral derivatives with asymmetric credit qualities is still lacking convincing mechanism. This paper presents an analytical model for valuing derivatives subject to default by both counterparties. The default-free interest rates are modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

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