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Life-cycle planning with CEV model and time-inconsistent preferences

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dc.contributor.authorWang, Ningen
dc.date.accessioned2025-05-30T01:28:13Z
dc.date.available2025-05-30T01:28:13Z
dc.date.issued2024en
dc.description.abstractIn this paper, we investigate an optimization problem for a wage earner seeking to maximize expected utilities until retirement by choosing optimal consumption, investment, and life insurance purchase strategies. The constant elasticity of variance (CEV) model is adopted describe the price process of the risky asset. Additionally, we assume that the wage earner has time-inconsistent preferences. This makes the wage earner discount her payoff by a non-constant discount rate. Applying the dynamic programming principle, we have derived the HamiltonJacobi-Bellman (HJB) equation corresponding to the optimization problem. Furthermore, we present semi-analytical expressions for optimal strategies and value functions in three cases: the benchmark model with time-consistent preferences, the naive and sophisticated wage earners with time-inconsistent preferences. Finally, illustrations of the optimal solutions and some economic insights are provided in the numerical examples.en
dc.description.sponsorshipThis work was supported by the 111 Project (B14019), the Natural Science Research Project of Higher Education in Anhui Province (KJ2021A0104), the Anhui Provincial Philosophy and Social Sciences Planning Project (AHSKY2023D079) and the National Natural Science Foundation of China (12301597, 12071147, 11971034) .en
dc.description.statusPeer-revieweden
dc.format.extent21en
dc.identifier.issn1059-0560en
dc.identifier.otherWOS:001303114500001en
dc.identifier.otherORCID:/0000-0002-7667-2423/work/170763669en
dc.identifier.scopus85202009651en
dc.identifier.urihttp://www.scopus.com/inward/record.url?scp=85202009651&partnerID=8YFLogxKen
dc.identifier.urihttps://hdl.handle.net/1885/733754519
dc.language.isoenen
dc.rightsPublisher Copyright: © 2024 The Author(s)en
dc.sourceInternational Review of Economics and Financeen
dc.subjectCEV modelen
dc.subjectConsumptionen
dc.subjectInvestmenten
dc.subjectLife-insuranceen
dc.subjectTime-inconsistenten
dc.titleLife-cycle planning with CEV model and time-inconsistent preferencesen
dc.typeJournal articleen
dspace.entity.typePublicationen
local.contributor.affiliation; Anhui Normal Universityen
local.contributor.affiliation; Anhui Normal Universityen
local.contributor.affiliation; Macquarie Universityen
local.contributor.affiliation; East China Normal Universityen
local.contributor.affiliationWang, Ning; Research School of Finance, Actuarial Studies and Statistics, Research School of Finance, Actuarial Studies & Statistics, ANU College of Business & Economics, The Australian National Universityen
local.identifier.citationvolume96en
local.identifier.doi10.1016/j.iref.2024.103517en
local.identifier.doi10.1016/j.iref.2024.103517en
local.identifier.pureadc28781-a58b-495d-ac68-eb28a3635a19en
local.identifier.urlhttps://www.scopus.com/pages/publications/85202009651en
local.type.statusPublisheden

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