The course focuses on the optimal consumption and investment decisions of utility-maximizing individuals in an intertemporal setting. The analysis is carried out in a continuous-time framework in which the basic uncertainty is represented by Brownian Motions. General results on diversification, fund separation, and intertemporal hedging are derived and discussed.
A number of specialized models for long-term investment problems of individuals are analyzed in detail. The appropriateness of popular investment advice is discussed. The lectures include occasional discussions of exercises.Course subject areas:- Review of dynamic programming in continuous time- Consumption/portfolio choice when investment opportunities are constant- General results on consumption/portfolio choice when investment opportunities are stochastic; intertemporal hedging- Consumption/portfolio choice with interest rate risk- Consumption/portfolio choice with stochastic market prices of risk- Consumption/portfolio choice with stochastic price volatility- Consumption/portfolio choice with inflation uncertainty- Consumption/portfolio choice with labor income risk- Consumption/portfolio choice when housing decisions are included.
Period
08-08-2011 - 12-08-2011 (1 weeks)
Target group
4388 Derivatives and Risk Management
6330 Advanced Financial Economics
Course aim
After completion of the course, it is expected that the student can:- explain the general modeling techniques presented in the course and apply them to specific problems similar to those studied in the course- explain how the results in the specific models are derived- provide and discuss economic interpretations of the models and the results- evaluate and compare the assumptions and results of different models
Credits
5.0 ECTS credits
Course fee
EUR 0. Visit website for information regarding fees
Course leader
Claus Munk
Aarhus University International Centre
Address: Hoeg Guldbergs Gade 4, building 1650 Aarhus C
Postal code: 8000
City: Aarhus
Country: Denmark
Website: http://www.au.dk/summeruniversity
E-mail: SummerUniversity@adm.au.dk
Phone: +45 8942 2320
Dynamic Asset Allocation
