WSEAS Transactions on Systems and Control
Print ISSN: 1991-8763, E-ISSN: 2224-2856
Volume 11, 2016
Portfolio Selection with the Extended CIR Model in the Utility Framework?
Authors: ,
Abstract: This paper studies a continuous-time dynamic portfolio selection problem with multiple risky assets in the utility framework, where we assume that the financial market is composed of one risk-free asset, multiple risky assets and one zero-coupon bond, and short rate is driven by the CIR model. By using dynamic programming principle and solving corresponding Hamilton-Jacobi- Bellman(HJB) equation, we obtain the optimal portfolios for power utility and exponential utility. In addition, we obtain the closed-form solutions to the optimal portfolios under Hyperbolic Absolute Risk Aversion (HARA) utility, which covers power utility, exponential utility and logarithm utility as special cases.
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Keywords: the CIR model, portfolio selection, dynamic programming principle, utility criterion, HARA utility
Pages: 333-341
WSEAS Transactions on Systems and Control, ISSN / E-ISSN: 1991-8763 / 2224-2856, Volume 11, 2016, Art. #36