Optimal Sharing Rule for a Household with a Portfolio Management Problem

Oumar Mbodji, Adrien Nguyen Huu () and Traian A. Pirvu
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Oumar Mbodji: Department of Mathematics and Statistics, McMaster University, Hamilton, Canada
Adrien Nguyen Huu: CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier
Traian A. Pirvu: Department of Mathematics and Statistics, McMaster University, Hamilton, Canada
Authors registered in the RePEc Author Service: Adrien Nguyen-Huu

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: We study an intra-household decision process in the Merton financial portfolio problem.This writes as an optimal consumption-investment problem in finite horizon for the case of two separate consumption streams and a shared final wealth, in a linear social welfare setting. We show that the aggregate problem for multiple agents can be linearly separated in multiple optimal single agent problems given an optimal sharing rule of the initial endowment. Consequently, an explicit closed form solution is obtained for each subproblem, and for the household as a whole. We show the impact of asymmetric risk aversion and market price of risk on the sharing rule in a specified setting with mean-reverting price of risk, with numerical illustration.

Keywords: market price of risk; martingale techniques; martingale tech-niques JEL: G11 (primary); optimal consumption; time inconsistency; C61 (secondary); portfolio management; Portfolio optimization; household decision (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-00940233v4
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Optimal sharing rule for a household with a portfolio management problem (2019)
Working Paper: Optimal Sharing Rule for a Household with a Portfolio Management Problem (2019)
Working Paper: Optimal sharing rule for a household with a portfolio management problem (2019)
Working Paper: Optimal Sharing Rule for a Household with a Portfolio Management Problem (2019)
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