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Minimizing the probability of lifetime ruin under stochastic volatility

By Erhan Bayraktar, Xueying Hu and Virginia R. Young

Abstract

We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. Given the rate of consumption, we find the optimal investment strategy for the individual who wishes to minimize the probability of going bankrupt. To solve this minimization problem, we use techniques from stochastic optimal control.Optimal investment Minimizing the probability of lifetime ruin Stochastic volatility

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