Stochastics and Finance: Yu-Jui Huang -- Mortality and Healthcare: a Stochastic Control Analysis under Epstein-Zin

Dear All, 

You are kindly invited to attend the next Stochastics and Finance seminar.  On Thursday
May 27 at 1pm (Sydney time) Yu-Jui Huang will give a talk via Zoom.  

Zoom link: https://uni-sydney.zoom.us/j/87491585109 

Speaker: Dr Yu-Jui Huang (University of Colorado) 

Title: Mortality and Healthcare: a Stochastic Control Analysis under Epstein-Zin
Preferences 

Abstract: This paper studies optimal consumption, investment, and healthcare spending
under Epstein-Zin preferences.  Given consumption and healthcare spending plans,
Epstein-Zin utilities are defined over an agent’s random lifetime, partially
controllable by the agent as healthcare reduces mortality growth.  To the best of our
knowledge, this is the first time Epstein-Zin utilities are formulated on a controllable
random horizon, via an infinite-horizon backward stochastic differential equation with
superlinear growth.  A new comparison result is established for the uniqueness of
associated utility value processes.  In a Black-Scholes market, the stochastic control
problem is solved through the related Hamilton-Jacobi-Bellman (HJB) equation.  The
verification argument features a delicate containment of the growth of the controlled
morality process, which is unique to our framework, relying on a combination of
probabilistic arguments and analysis of the HJB equation.  In contrast to prior work
under time-separable utilities, Epstein-Zin preferences largely facilitate calibration.
In four countries we examined, the model-generated mortality closely approximates actual
mortality data; moreover, the calibrated efficacy of healthcare is in broad agreement
with empirical studies on healthcare across countries.  (This is joint work with Joshua
Aurand).  

https://www.maths.usyd.edu.au/u/SemConf/Stochastics_Finance/seminar.html 

Please feel free to forward this message to anyone who might be interested in this
talk.  

Kind regards, 

Anna