Corpus ID: 237503463

A consumption-investment model with state-dependent lower bound constraint on consumption

@inproceedings{Guan2021ACM,
  title={A consumption-investment model with state-dependent lower bound constraint on consumption},
  author={Chonghu Guan and Zuo Quan Xu and Fahuai Yi},
  year={2021}
}
This paper considers a life-time consumption-investment problem under the Black-Scholes framework, where the investor’s consumption rate is subject to a lower bound constraint that linearly depends on the investor’s wealth. Due to the state-dependent control constraint, the standard stochastic control theory cannot be directly applied to our problem. We overcome this obstacle by examining an equivalent problem that does not impose state-dependent control constraint. It is shown that the value… Expand

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