Optimal Consumption and Investment with Bankruptcy

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In a set of articles published in 1979 and 1983, Suresh Sethi and various co-authors introduced a bankruptcy value/penalty in the consumption/investment model. They also introduced a nonzero subsistence consumption level, which makes the consideration of bankruptcy even more important. This provided the ability to deal mathematically with the problems of bankruptcy in the study of consumption and investment. This text provides a frame for deepening understanding of the consumption and portfolio selection behaviour of individuals and households.