BFS 2002

Poster Presentation

An Optimal Consumption Problem for Factor Dependent Models

Daniel Hernandez-Hernandez, Wendell H. Fleming

An extension of the classical Merton model with consumption is considered when the diffusion coefficient of the asset prices depends on some economic factor. The objective is to maximize total expected discounted HARA utility of consumption. Optimal controls are provided as well as a characterization of the value function in terms of the associated Hamilton-Jacobi-Bellman equation.