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Optimal Consumption and Portfolio Decision with Convertible Bond in Affine Interest Rate and Heston’s SV Framework
Joint Authors
Source
Mathematical Problems in Engineering
Issue
Vol. 2016, Issue 2016 (31 Dec. 2016), pp.1-12, 12 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2016-06-19
Country of Publication
Egypt
No. of Pages
12
Main Subjects
Abstract EN
We are concerned with an optimal investment-consumption problem with stochastic affine interest rate and stochastic volatility, in which interest rate dynamics are described by the affine interest rate model including the Cox-Ingersoll-Ross model and the Vasicek model as special cases, while stock price is driven by Heston’s stochastic volatility (SV) model.
Assume that the financial market consists of a risk-free asset, a zero-coupon bond (or a convertible bond), and a risky asset.
By using stochastic dynamic programming principle and the technique of separation of variables, we get the HJB equation of the corresponding value function and the explicit expressions of the optimal investment-consumption strategies under power utility and logarithmic utility.
Finally, we analyze the impact of market parameters on the optimal investment-consumption strategies by giving a numerical example.
American Psychological Association (APA)
Chang, Hao& Li, Xue-Yan. 2016. Optimal Consumption and Portfolio Decision with Convertible Bond in Affine Interest Rate and Heston’s SV Framework. Mathematical Problems in Engineering،Vol. 2016, no. 2016, pp.1-12.
https://search.emarefa.net/detail/BIM-1112227
Modern Language Association (MLA)
Chang, Hao& Li, Xue-Yan. Optimal Consumption and Portfolio Decision with Convertible Bond in Affine Interest Rate and Heston’s SV Framework. Mathematical Problems in Engineering No. 2016 (2016), pp.1-12.
https://search.emarefa.net/detail/BIM-1112227
American Medical Association (AMA)
Chang, Hao& Li, Xue-Yan. Optimal Consumption and Portfolio Decision with Convertible Bond in Affine Interest Rate and Heston’s SV Framework. Mathematical Problems in Engineering. 2016. Vol. 2016, no. 2016, pp.1-12.
https://search.emarefa.net/detail/BIM-1112227
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1112227