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http://dx.doi.org/10.12941/jksiam.2013.17.115

THE EFFECT OF INFLATION RISK AND SUBSISTENCE CONSTRAINTS ON PORTFOLIO CHOICE  

Lim, Byung Hwa (Graduate School of Financial Engineering, The Univ. of Suwon)
Publication Information
Journal of the Korean Society for Industrial and Applied Mathematics / v.17, no.2, 2013 , pp. 115-128 More about this Journal
Abstract
The optimal portfolio selection problem under inflation risk and subsistence constraints is considered. There are index bonds to invest in financial market and it helps to hedge the inflation risk. By applying the martingale method, the optimal consumption rate and the optimal portfolios are obtained explicitly. Furthermore, the quantitative effect of inflation risk and subsistence constraints on the optimal polices are also described.
Keywords
Inflation risk; index bond; subsistence constraints; portfolio choice; martingale method;
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