Optimal consumption, portfolio, life insurance and retirement decision in a life-cycle model - with borrowing and consumption constraint

Specialeforsvar ved Lars Lisby Eriksen

Titel: Optimal consumption, portfolio, life insurance and retirement decision in a life-cycle model – with borrowing and consumption constraint

Abstract: This thesis analyses the behaviour of an agent who wants to optimize his consumption, portfolio, life insurance and retirement decision in a life-cycle model with a borrowing and consumption constraint. The choice problem is solved using the martingale approach for a general utility function as well as for a utility of CRRA type. The retirement time is the optimal stopping time, which is acquired by solving a variational inequality. The thesis shows that due to the constraints on wealth and consumption the critical wealth level for which it is optimal to retire is reduced. Moreover it shows that a reduction in the optimal consumption, portfolio and life insurance purchase is also induced

Vejleder: Jesper Lund Pedersen
Censor:  Bjarne Astrup Jensen, CBS