High risk aversion Merton's problem without transversality conditions
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arXiv
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| Hauptverfasser: | , , , |
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| Format: | Preprint |
| Veröffentlicht: |
2025
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| _version_ | 1866916880041639936 |
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| author | Biffis, Enrico Di Girolami, Cristina Federico, Salvatore Gozzi, Fausto |
| author_facet | Biffis, Enrico Di Girolami, Cristina Federico, Salvatore Gozzi, Fausto |
| contents | This paper revisits the classical Merton portfolio choice problem over infinite horizon for high risk aversion, addressing technical challenges related to establishing the existence and identification of optimal strategies. Traditional methods rely on perturbation arguments and/or impose restrictive conditions, such as large discount rates and/or bounded strategies, to ensure well-posedness. Our approach leverages the problem's homogeneity to directly solve the associated Hamilton-Jacobi-Bellman equation and verify the optimality of candidate strategies without requiring transversality conditions. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2508_02596 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | High risk aversion Merton's problem without transversality conditions Biffis, Enrico Di Girolami, Cristina Federico, Salvatore Gozzi, Fausto Optimization and Control 93E20, 49L12 This paper revisits the classical Merton portfolio choice problem over infinite horizon for high risk aversion, addressing technical challenges related to establishing the existence and identification of optimal strategies. Traditional methods rely on perturbation arguments and/or impose restrictive conditions, such as large discount rates and/or bounded strategies, to ensure well-posedness. Our approach leverages the problem's homogeneity to directly solve the associated Hamilton-Jacobi-Bellman equation and verify the optimality of candidate strategies without requiring transversality conditions. |
| title | High risk aversion Merton's problem without transversality conditions |
| topic | Optimization and Control 93E20, 49L12 |
| url | https://arxiv.org/abs/2508.02596 |