Utility Function-based Consumption Model under Continuous Time

DOI

10.2991/hssmee-18.2018.40How to use a DOI?

Keywords

portfolio model, CARA utility function, CRRA utility function.

Abstract

The model of the portfolio distributing wealth to different assets in a certain proportion maximizes the expected utility function. The classic mean variance model proposed by Markowitz cannot meet the current demand for investment, while the dynamic portfolio model can more accurately describe the current changes in the price of different assets, which is more conducive to investors making corresponding decisions. The dynamic portfolio model not only provides a viable way for the inter-period distribution of limited resources, but also provides a guarantee for investors to predict the price of the market in the future. Therefore, it is of great significance to study the dynamic portfolio model. As a quantitative description of investor preference, the utility function is a direct way to measure the effectiveness of the portfolio model. Therefore, it is of great importance to study the portfolio model achieving the greatest expected utility. This paper mainly studies and improves the portfolio model based on CARA utility function and CRRA utility function. The non-parametric estimation and the method of solving differential equations are used to obtain the corresponding estimation expressions and first-order conditions. At the same time, the application of CRRA utility function in private equity is analyzed.

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Huawei Zhao
PY  - 2018/09
DA  - 2018/09
TI  - Utility Function-based Consumption Model under Continuous Time
BT  - Proceedings of the 2018 International Symposium on Humanities and Social Sciences, Management and Education Engineering (HSSMEE 2018)
PB  - Atlantis Press
SP  - 227
EP  - 240
SN  - 2352-5398
UR  - https://doi.org/10.2991/hssmee-18.2018.40
DO  - 10.2991/hssmee-18.2018.40
ID  - Zhao2018/09
ER  -