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SUMMARY:The Merton Problem with a Drawdown Constraint on Consumption - Aru
 n Thillaisundaram (DPMMS)
DTSTART:20130424T150000Z
DTEND:20130424T160000Z
UID:TALK44325@talks.cam.ac.uk
CONTACT:Martin Taylor
DESCRIPTION:We work in the framework of the Merton problem but we impose a
  drawdown constraint on the consumption process. This means that consumpti
 on can never fall below a fixed proportion of the running maximum of past 
 consumption. In terms of economic motivation\, this constraint represents 
 a type of habit formation where the investor is reluctant to let his stand
 ard of living fall too far from the maximum standard achieved to date. We 
 use techniques from stochastic optimal control and duality theory to obtai
 n our candidate value function and optimal controls\, which are then verif
 ied.
LOCATION:MR14\, Centre for Mathematical Sciences
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