NMAK22001U Consumption-Investment Problems

Volume 2022/2023
Education

MSc Programme in Actuarial Mathematics
MSc Programme in Mathematics-Economics

Content

An overview of classes of problems, solution methods, and classes of solutions within personal financial optimization. Personal financial optimization includes consumption-investment problems and classes of problems are categorized by a) specification of preferences in terms of consumption utility functions, b) time versus risk preferences, c) inclusion of insurance risk and decision making, and d) state-dependent utility where the state can be spanned by the financial market. The various problems are discussed and solved, and the structures of solutions are understood as different patterns of consumption, investment, and insurance over the life cycle. 

Learning Outcome

Knowledge about classes of problems, solution methods, and classes of solutions within personal financial optimization.

Skills: At the end of the course the student is expected to be able to discuss in detail classes of problems, solution methods, and classes of solutions within personal financial optimization. The starting point is Merton's consumption-investment problem in continuos time and from there we generalise to state-dependent utility and applications of equilibrium theory.

Competencies: To give the student insight in classes of problems, solution methods, and classes of solutions within personal financial optimization.

Continuous-Time Finance (e.g. the course FinKont) including Ito Calculus and pricing and hedging of contingent claims in diffusive markets. A Bachelors degree is recommended.
Lectures. The students get to see the course contents in regular lectures. Since the core content concern individual preferences and individual decision making, the students' preferences and decision making is discussed with the students during the lectures.
  • Category
  • Hours
  • Lectures
  • 28
  • Preparation
  • 177
  • Exam
  • 1
  • Total
  • 206
Continuous feedback during the course of the semester
Feedback by final exam (In addition to the grade)

Continuous feedback during the course of the semester is given during discussions about the students' preferences and decision making.

Credit
7,5 ECTS
Type of assessment
Oral examination, 30 minutes
Type of assessment details
Without preparation time
Marking scale
7-point grading scale
Censorship form
No external censorship
Several internal examiners
Re-exam

As the ordinary exam

Criteria for exam assesment

The student must, in a satisfactory way, demonstrate that he/​she masters the learning outcome.