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Document Details :

Title: Optimal Consumption and Insurance
Subtitle: A Continuous-time Markov Chain Approach
Author(s): KRAFT, Holger , STEFFENSEN, Mogens
Journal: ASTIN Bulletin
Volume: 38    Issue: 1   Date: May 2008   
Pages: 231-257
DOI: 10.2143/AST.38.1.2030412

Abstract :
Personal financial decision making plays an important role in modern finance. Decision problems about consumption and insurance are in this article modelled in a continuous-time multi-state Markovian framework. The optimal solution is derived and studied. The model, the problem, and its solution are exemplified by two special cases: In one model the individual takes optimal positions against the risk of dying; in another model the individual takes optimal positions against the risk of losing income as a consequence of disability or unemployment.