Journal of the Chungcheong Mathematical Society (충청수학회지)

The Chungcheong Mathematical Society (충청수학회)
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PORTFOLIO SELECTION WITH HYPERBOLIC DISCOUNTING AND INFLATION RISK

  • Lim, Byung Hwa (Department of Economics and Finance The University of Suwon)
  • Received : 2021.01.18
  • Accepted : 2021.05.08
  • Published : 2021.05.15
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Abstract

This paper investigates the time-inconsistent agent's optimal consumption and investment problem under inflation risk. The agents' discount factor is governed by hyperbolic discounting, which has a random time to change. We impose the inflation risk which plays a crucial role in long-term financial planning. We derive the semi-analytic solution to the problem of sophisticated agents when the time horizon is finite.

Keywords

Acknowledgement

This paper was supported by the National Research Foundation of Korea Grant funded by the Korean Government(NRF), project No. NRF-2020R1F1A1A01076116.

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