2024/05/25 by Mauricio Elizalde, Elizalde, Mauricio, Stephan Sturm +1
Business, Management and Accounting · Engineering · #60H05 #60H07 #60H10 #60H35 #91G10 #Digital Innovation in Industries #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Portfolio Management (q-fin.PM) #Probability (math.PR) #Scheduling and Optimization Algorithms #Smart Grid Energy Management
paper · doi:10.48550/arxiv.2405.16336
openalex publication_date 2024/05/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
We aim to provide an intertemporal, cost-efficient consumption model that extends the consumption optimization inspired by the Distribution Builder, a tool developed by Sharpe, Johnson, and Goldstein. The Distribution Builder enables the recovery of investors' risk preferences by allowing them to select a desired distribution of terminal wealth within their budget constraints. This approach differs from the classical portfolio optimization, which considers the agent's risk aversion modeled by utility functions that are challenging to measure in practice. Our intertemporal model captures the dependent structure between consumption periods using copulas. This strategy is demonstrated using both the Black-Scholes and CEV models.