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Mathematical Problems in Engineering
Volume 2013, Article ID 715869, 9 pages
http://dx.doi.org/10.1155/2013/715869
Research Article

Optimal Portfolio of Corporate Investment and Consumption Problem under Market Closure: Inflation Case

1School of Mathematics, Shandong University, Jinan 250100, China
2School of Economics, Shandong University, Jinan 250100, China

Received 21 January 2013; Revised 24 March 2013; Accepted 22 April 2013

Academic Editor: Guangchen Wang

Copyright © 2013 Zongyuan Huang and Detao Zhang. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We present the model of corporate optimal investment with consideration of the influence of inflation and the difference between the market opening and market closure. In our model, the investor has three market activities of his or her choice: investment in project A, investment in project B, and consumption. The optimal strategy for the investor is obtained using the Hamilton-Jacobi-Bellman equation which is derived using the dynamic programming principle. Further along, a specific case, the Hyperbolic Absolute Risk Aversion case, is discussed in detail, where the explicit optimal strategy can be obtained using a very simple and direct method. At the very end, we present some simulation results along with a brief analysis of the relationship between the optimal strategy and other factors.