✦ LIBER ✦
Optimal investment problem with stochastic interest rate and stochastic volatility: Maximizing a power utility
✍ Scribed by Jinzhu Li; Rong Wu
- Publisher
- John Wiley and Sons
- Year
- 2009
- Tongue
- English
- Weight
- 126 KB
- Volume
- 25
- Category
- Article
- ISSN
- 1524-1904
- DOI
- 10.1002/asmb.759
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✦ Synopsis
Abstract
In this paper, we assume that an investor can invest his/her wealth in a bond and a stock. In our wealth model, the stochastic interest rate is described by a Cox–Ingersoll–Ross (CIR) model, and the volatility of the stock is proportional to another CIR process. We obtain a closed‐form expression of the optimal policy that maximizes a power utility. Moreover, a verification theorem without the usual Lipschitz assumptions is proved, and the relationships between the optimal policy and various parameters are given. Copyright © 2009 John Wiley & Sons, Ltd.