재무연구 제 권 호 (2013년 5월)
Asian Review of Financial Research, Vol., No..
pp.1874~1893
pp.1874~1893
A Continuous-Time Consumption and Investment Problem under Endogenous Liquidity Constraints
Kyoung Jin Choi Haskayne School of Business, University of Calgary, Canada
Byung Hwa Lim Graduate School of Financial Engineering, The University of Suwon, Republic of Korea
Hyeng Keun Koo College of Business Adminstration, Ajou University, Republic of Korea
We consider a continuous-time individual’s optimal portfolio selection problem under the endogenous liquidity constraints. The economic agent faces limited commitment so the endogenous liquidity constraints are expressed as an outside option to stop participating in the financial market. We derive closed-form solutions for the optimal policies and verify that the endogenous liquidity constraints induce an endogenous wealth boundary of default. More quantitative results are provided in the case of constant relative risk aversion (CRRA) utility. The dual value function of the agent contains an outside option premium that leads to a lower consumption and a lower investment in the risky asset, in particular when the wealth level becomes closer to the default boundary.
Kyoung Jin Choi
Byung Hwa Lim
Hyeng Keun Koo
We consider a continuous-time individual’s optimal portfolio selection problem under the endogenous liquidity constraints. The economic agent faces limited commitment so the endogenous liquidity constraints are expressed as an outside option to stop participating in the financial market. We derive closed-form solutions for the optimal policies and verify that the endogenous liquidity constraints induce an endogenous wealth boundary of default. More quantitative results are provided in the case of constant relative risk aversion (CRRA) utility. The dual value function of the agent contains an outside option premium that leads to a lower consumption and a lower investment in the risky asset, in particular when the wealth level becomes closer to the default boundary.
