Minimizing the Probability of Ruin when Consumption is Ratcheted

Details Minimizing the Probability of Ruin when Consumption is Ratcheted Minimizing the Probability of Ruin when Consumption is Ratcheted

2008-06-14

arxiv.org/abs/0806.2358v1

Economy

Quantitative Finance

Risk Management

Key Words: Self-annuitization, optimal investment, stochastic optimal control, probability of ruin, ratcheting of consumption

Scientific paper

We assume that an agent's rate of consumption is {\it ratcheted}; that is, it
forms a non-decreasing process. Given the rate of consumption, we act as
financial advisers and find the optimal investment strategy for the agent who
wishes to minimize his probability of ruin.

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