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Optimal investment strategies in a CIR framework

Published online by Cambridge University Press:  14 July 2016

Griselda Deelstra ,
Martino Grasselli  and
Pierre-François Koehl
Griselda Deelstra*
Affiliation:
CREST and ENSAE
Martino Grasselli*
Affiliation:
CREST
Pierre-François Koehl*
Affiliation:
CDC and DABF
*
∗ Postal address: Centre for Research in Economics and Statistics, Finance Department, 15 Boulevard Gabriel Péri, 92245 Malakoff Cedex, France.
∗ Postal address: Centre for Research in Economics and Statistics, Finance Department, 15 Boulevard Gabriel Péri, 92245 Malakoff Cedex, France.
∗∗∗ Postal address: Caisse des Dépôts et Consignations, Direction des Activités Bancaires et Financières, Paris, France.
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Abstract

We study an optimal investment problem in a continuous-time framework where the interest rates follow Cox-Ingersoll-Ross dynamics. Closed form formulae for the optimal investment strategy are obtained by assuming the completeness of financial markets and the CRRA utility function. In particular, we study the behaviour of the solution when time approaches the terminal date.

Keywords

Consumption-investment strategystochastic interest ratesstochastic optimization
Type
Research Papers
Information
Journal of Applied Probability , Volume 37 , Issue 4 , December 2000 , pp. 936 - 946
Copyright
Copyright © by the Applied Probability Trust 2000 

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Footnotes

The views expressed in this paper are those of the authors and do not reflect those of the CDC.

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