文档介绍：Dynamic Asset Allocation with Stochastic
e and Interest Rates∗
February 28, 2005
Claus Munk† Carsten Sørensen
Dept. of Accounting and Finance Department of Finance
University of Southern Denmark Copenhagen Business School
E-mail: ******@ E-mail: cs.******@
∗This research is financially supported by INQUIRE EUROPE. We ments from par-
ticipants at presentations at the EIASM Workshop on Dynamic Strategies in Asset Allocation and Risk
Management in Brussels and at the Goethe University in Frankfurt.
†Corresponding author. Full address: Department of Accounting and Finance, University of Southern
Denmark, Campusvej 55, DK-5230 Odense M, Denmark. Phone: +45 6550 3257. Fax: +45 6593 0726.
Dynamic Asset Allocation with Stochastic
e and Interest Rates
February 28, 2005
Abstract. We investigate the optimal investment and consumption
choice of individual investors with uncertain future labor e operat-
ing in a financial market with stochastic interest rates. Since the present
value of the individual’s future e is a main determinant of the opti-
mal behavior and this present value depends heavily on the interest rate
dynamics, the joint stochastics of e and interest rates will have con-
sequences beyond the separate effects of stochastic e and stochastic
interest rates. We study both the case where e risk is spanned and
there are no portfolio constraints and the case with non-spanned e
risk and a constraint ruling out borrowing against future e. For the
spanned, unconstrained problem we study a special case in which we ob-
tain closed-form expressions for the optimal policies. For the unspanned,
constrained problem we implement a numerical solution technique and
compare the solutions to the spanned, unconstrained problem. We also
allow for typical life-cycle variations in labor e.
Keywords. Portfolio management, labor e risk, interest rate risk,
hedging, borrowing constraints, life-cycle
Dynamic Asset Allocation w