Optimal portfolio and wealth valuation strategies with stochastic cash flows dependent on the optimal wealth

Abstract

This paper examines and study the optimal portfolio and wealth valuation involving stochastic cash inflows and stochastic cash outflows for a certain investor who trades in a complete diffusion models, receives a stochastic cash inflows and pays a stochastic outflows. The dynamics of the wealth process is assumed to involved two risky assets and a cash account. We established the optimal value of wealth and show that the cash inflows and cash outflows depend on the optimal wealth of the investor.