Optimal investment problem with stochastic interest rate and stochastic volatility: Maximizing a power utility

Jinzhu Li and Rong Wu

Applied Stochastic Models in Business and Industry, 2009, vol. 25, issue 3, 407-420

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.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1002/asmb.759

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmbi:v:25:y:2009:i:3:p:407-420

Access Statistics for this article

More articles in Applied Stochastic Models in Business and Industry from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().