Time-inconsistent consumption-investment problems in incomplete markets under general discount functions
arXiv:1912.01281 · doi:10.1137/19M1303782
Abstract
In this paper, we study a time-inconsistent consumption-investment problem with random endowments in a possibly incomplete market under general discount functions. We provide a necessary condition and a verification theorem for an open-loop equilibrium consumption-investment pair in terms of a coupled forward-backward stochastic differential equation. Moreover, we prove the uniqueness of the open-loop equilibrium pair by showing that the original time-inconsistent problem is equivalent to an associated time-consistent one.
30 pages