Bankruptcy and retirement: a comparison in an optimal stopping times ordered framework

Abstract

We deal with an agent who optimally decides the consumption-portfolio-leisure policy to maximize a power utility function, considering two optimal stopping times: bankruptcy and retirement from labor. Predetermining the order of these two stopping times, we find two independent multiple stopping times models: the optimization problem of retirement before bankruptcy, and the one of bankruptcy before retirement. In the numerical results part, we perform the sensitivity analysis with respect to key parameters, and conduct a comparative analysis.