scholarly journals Optimal Investment Strategy under Stochastic Interest Rates

2017 ◽  
Vol 07 (02) ◽  
pp. 319-332 ◽  
Author(s):  
Adeline Peter Mtunya ◽  
Philip Ngare ◽  
Yaw Nkansah-Gyekye
Keyword(s):  
Interest Rates ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Stochastic Interest Rates ◽  
Optimal Investment Strategy ◽  
Stochastic Interest

scholarly journals Optimal Investment Strategy under the CEV Model with Stochastic Interest Rate

2020 ◽  
Vol 2020 ◽  
pp. 1-11
Author(s):  
Yong He ◽  
Peimin Chen
Keyword(s):  
Interest Rate ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Risky Asset ◽  
Stochastic Interest Rate ◽  
Model Parameters ◽  
Optimal Investment Strategy ◽  
Stochastic Interest ◽  
Cev Process ◽  
The Interest Rate

Interest rate is an important macrofactor that affects asset prices in the financial market. As the interest rate in the real market has the property of fluctuation, it might lead to a great bias in asset allocation if we only view the interest rate as a constant in portfolio management. In this paper, we mainly study an optimal investment strategy problem by employing a constant elasticity of variance (CEV) process and stochastic interest rate. The assets of investment for individuals are supposed to be composed of one risk-free asset and one risky asset. The interest rate for risk-free asset is assumed to follow the Cox–Ingersoll–Ross (CIR) process, and the price of risky asset follows the CEV process. The objective is to maximize the expected utility of terminal wealth. By applying the dual method, Legendre transformation, and asymptotic expansion approach, we successfully obtain an asymptotic solution for the optimal investment strategy under constant absolute risk aversion (CARA) utility function. In the end, some numerical examples are provided to support our theoretical results and to illustrate the effect of stochastic interest rates and some other model parameters on the optimal investment strategy.

scholarly journals Optimal investment strategies in a CIR framework

2000 ◽  
Vol 37 (4) ◽  
pp. 936-946 ◽  
Author(s):  
Griselda Deelstra ◽  
Martino Grasselli ◽  
Pierre-François Koehl
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Utility Function ◽  
Closed Form ◽  
Continuous Time ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Optimal Investment Strategy ◽  
Optimal Investment Problem

We study an optimal investment problem in a continuous-time framework where the interest rates follow Cox-Ingersoll-Ross dynamics. Closed form formulae for the optimal investment strategy are obtained by assuming the completeness of financial markets and the CRRA utility function. In particular, we study the behaviour of the solution when time approaches the terminal date.

scholarly journals Optimal investment strategies in a CIR framework

2000 ◽  
Vol 37 (04) ◽  
pp. 936-946 ◽  
Author(s):  
Griselda Deelstra ◽  
Martino Grasselli ◽  
Pierre-François Koehl
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Utility Function ◽  
Closed Form ◽  
Continuous Time ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Optimal Investment Strategy ◽  
Optimal Investment Problem

We study an optimal investment problem in a continuous-time framework where the interest rates follow Cox-Ingersoll-Ross dynamics. Closed form formulae for the optimal investment strategy are obtained by assuming the completeness of financial markets and the CRRA utility function. In particular, we study the behaviour of the solution when time approaches the terminal date.

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