Portfolio Rules with Log Consumption Utility and Cox–Ingersoll–Ross Interest Rate

We consider the portfolio management problem with the objective of consumption optimization. Dynamic programming is applied to find the portfolio and consumption management strategy. Lower and upper solutions of an ordinary differential equation are applied to prove that the proposed strategy is opt...

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Veröffentlicht in:	Computational mathematics and modeling 2015-04, Vol.26 (2), p.175-183
1. Verfasser:	Babin, V. A.
Format:	Artikel
Sprache:	eng
Schlagworte:	Applications of Mathematics Computational Mathematics and Numerical Analysis Consumption Interest rates Management Mathematical analysis Mathematical Modeling and Industrial Mathematics Mathematical models Mathematics Mathematics and Statistics Optimization Strategy Utilities
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Beschreibung
Zusammenfassung:	We consider the portfolio management problem with the objective of consumption optimization. Dynamic programming is applied to find the portfolio and consumption management strategy. Lower and upper solutions of an ordinary differential equation are applied to prove that the proposed strategy is optimal for an infinite planning horizon with a log utility function and interest rate specified by the generalized Cox–Ingersoll–Ross model. The optimal control is determined analytically for the Vasicek model.
ISSN:	1046-283X 1573-837X
DOI:	10.1007/s10598-015-9266-1