Value function approximation in the presence of uncertainty and inequality constraints: an application to the demand for credit cards

Article Abstract:

An algorithm is developed for approximating the numerical solution to intertemporal optimization models characterized by multiple assets and inequality limitations. This method can promote a greater understanding of the first and second derivatives of the value function, risk aversion and asset demands. It is applied to a model of credit card debt demand.

Methods, Usage, Credit cards, Supply and demand, Algorithms, Numerical analysis

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Biconvergent stochastic dynamic programming, asymptotic impatience, and 'average' growth

Article Abstract:

New optimization methods for solving stochastic dynamic problems are presented. Specifically, the mathematical bases of stochastic dynamic programming for nonlinear preferences that are not additive across time or additive across states. The theorems analyzed assume biconvergence, which requires the asymptotic domination of impatience over growth.

Growth, Growth (Physiology)

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Distribution of bankruptcy time in a consumption/portfolio problem

Article Abstract:

A study is conducted to determine the impact of such problem parameters as the rate of subsistence consumption and the bankruptcy value on the bankruptcy of the agency and on the timing of the bankruptcy. An explicit formula is developed for the probability distribution function in the bankruptcy time in a general consumption/investment problem.

Evaluation, Investments, Consumption (Economics), Bankruptcy

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