Denmark, Aarhus

Dynamic Asset Allocation

when 8 August 2011 - 12 August 2011
duration 1 week
credits 5 EC

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

Course leader

Claus Munk

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

Fee info

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