Sensitivity of Optimal Retirement Problem to Liquidity Constraints

20 Aug 2021  ·  Guodong Ding, Daniele Marazzina ·

In this work we analytically solve an optimal retirement problem, in which the agent optimally allocates the risky investment, consumption and leisure rate to maximise a gain function characterised by a power utility function of consumption and leisure, through the duality method. We impose different liquidity constraints over different time spans and conduct a sensitivity analysis to discover the effect of this kind of constraint.

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