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Optimal consumption-Investment Decisions Allowing for Bankruptcy: A Survey

This paper surveys the research on optimal consumption and investment problem of an agent who is subject to bankruptcy that has a specified utility (reward of penalty). The bankruptcy utility, modeled by a parameter, may be the result of welfare subsidies, the agent's innate ability to recover from bankruptcy, psychic costs associated with bankruptcy, etc. Models with non-negative consumption, positive subsistence consumption, risky assets modeled by geometric Brownian motions or semimartingales are discussed. The paper concludes with suggestions for open research problems.
Type of Seminar:
Public Seminar
Prof. Suresh P. Sethi
School of Management The University of Texas at Dallas, USA Box 830688, Mail Station JO4.7 Richardson, TX 75083-0688
Aug 23, 2000   17:15

ETH-Zentrum, ETZ E9, Gloriastrasse 35, 8001 Zurich
Contact Person:

Dr. A. Bemporad
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Biographical Sketch:
Suresh P. Sethi is Ashbel Smith Professor of Operations Management at The University of Texas at Dallas. He has published more than 250 research papers applying quantitative methods to the fields of manufacturing and operations management, finance and economics, marketing, and optimization theory. Several of his books are considered international classics in their fields, including Optimal Control Theory: Applications to Management Science (1981), Hierarchical Decision-making in Stochastic Manufacturing Systems (1994), and his most recent book, Optimal Consumption and Investment with Bankruptcy (1997). Honors include: Fellow of the New York Academy of Sciences (1999); C.Y. O’Connor Fellow, Curtin University, Perth, Australia (1998); Award of Merit of Canadian Operational Research Society (CORS) (1996); Honorary Professor at Zhejiang University of Technology, Hangzhou, China (appointed in 1996); Fellow of the Royal Society of Canada (1994); Visiting Erskine Fellow at the University of Canterbury, Christchurch, New Zealand (1991); Connaught Senior Research Fellow at the University of Toronto (1984-85). He has been listed in Canadian Who’s Who since 1997. He received a doctorate in Operations Research from Carnegie Mellon University in 1972 after completing engineering studies at IIT Bombay, India. Memberships: INFORMS, SIAM, AAAS, NYAS, CORS, POMS, ORSI.