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An Investment and Consumption Problem with CIR Interest Rate and Stochastic Volatility
Joint Authors
Source
Issue
Vol. 2013, Issue 2013 (31 Dec. 2013), pp.1-12, 12 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2013-05-29
Country of Publication
Egypt
No. of Pages
12
Main Subjects
Abstract EN
We are concerned with an investment and consumption problem with stochastic interest rate and stochastic volatility, in which interest rate dynamic is described by the Cox-Ingersoll-Ross (CIR) model and the volatility of the stock is driven by Heston’s stochastic volatility model.
We apply stochastic optimal control theory to obtain the Hamilton-Jacobi-Bellman (HJB) equation for the value function and choose power utility and logarithm utility for our analysis.
By using separate variable approach and variable change technique, we obtain the closed-form expressions of the optimal investment and consumption strategy.
A numerical example is given to illustrate our results and to analyze the effect of market parameters on the optimal investment and consumption strategies.
American Psychological Association (APA)
Chang, Hao& Rong, Xi-min. 2013. An Investment and Consumption Problem with CIR Interest Rate and Stochastic Volatility. Abstract and Applied Analysis،Vol. 2013, no. 2013, pp.1-12.
https://search.emarefa.net/detail/BIM-455598
Modern Language Association (MLA)
Chang, Hao& Rong, Xi-min. An Investment and Consumption Problem with CIR Interest Rate and Stochastic Volatility. Abstract and Applied Analysis No. 2013 (2013), pp.1-12.
https://search.emarefa.net/detail/BIM-455598
American Medical Association (AMA)
Chang, Hao& Rong, Xi-min. An Investment and Consumption Problem with CIR Interest Rate and Stochastic Volatility. Abstract and Applied Analysis. 2013. Vol. 2013, no. 2013, pp.1-12.
https://search.emarefa.net/detail/BIM-455598
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-455598