Optimal Strategies for Prudent Investors
R. Baviera, M. Pasquini, M. Serva, A. Vulpiani
Abstract
We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction of the maximum amount of money owned in her life in order that her economic level never decreases. The optimal strategy is obtained by maximizing the exponential growth rate for a fixed . We derive analytical expressions for the typical exponential growth rate of the capital and its fluctuations by solving an one-dimensional random walk with drift.
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