WSEAS Transactions on Systems and Control
Print ISSN: 1991-8763, E-ISSN: 2224-2856
Volume 10, 2015
Dynamics Optimal Portfolios with CIR Interest Rate Under a Heston Model
Authors: , ,
Abstract: This paper studies the dynamic portfolios with the Cox-Ingersoll-Ross(CIR) interest rate under a Heston model, which aims at maximizing the expected utility of the terminal wealth. In the model, the manager can invest his weatlh to a zero-coupon bond, a riskless asset and a stock. By applying dynamic programming principle, the explicit solutions of optimal portfolio strategy for constant relative risk aversion(CRRA) utility are achieved successfully. Finally, a numerical example is presented to characterize the dynamic behavior of optimal portfolio strategy.