Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate
In order to tackle the problem of how investors in financial markets allocate wealth to stochastic interest rate governed by a nested stochastic differential equations (SDEs), this paper employs the Nash equilibrium theory of the subgame perfect equilibrium strategy and propose an extended Hamilton-...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2020-01-01
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| Series: | Journal of Function Spaces |
| Online Access: | http://dx.doi.org/10.1155/2020/3153297 |
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| author | Shuang Li Shican Liu Yanli Zhou Yonghong Wu Xiangyu Ge |
| author_facet | Shuang Li Shican Liu Yanli Zhou Yonghong Wu Xiangyu Ge |
| author_sort | Shuang Li |
| collection | DOAJ |
| description | In order to tackle the problem of how investors in financial markets allocate wealth to stochastic interest rate governed by a nested stochastic differential equations (SDEs), this paper employs the Nash equilibrium theory of the subgame perfect equilibrium strategy and propose an extended Hamilton-Jacobi-Bellman (HJB) equation to analyses the optimal control over the financial system involving stochastic interest rate and state-dependent risk aversion (SDRA) mean-variance utility. By solving the corresponding nonlinear partial differential equations (PDEs) deduced from the extended HJB equation, the analytical solutions of the optimal investment strategies under time inconsistency are derived. Finally, the numerical examples provided are used to analyze how stochastic (short-term) interest rates and risk aversion affect the optimal control strategies to illustrate the validity of our results. |
| format | Article |
| id | doaj-art-9b42457bdff8475ba94ff2dab9dd3da4 |
| institution | Kabale University |
| issn | 2314-8896 2314-8888 |
| language | English |
| publishDate | 2020-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Function Spaces |
| spelling | doaj-art-9b42457bdff8475ba94ff2dab9dd3da42025-02-03T05:52:31ZengWileyJournal of Function Spaces2314-88962314-88882020-01-01202010.1155/2020/31532973153297Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest RateShuang Li0Shican Liu1Yanli Zhou2Yonghong Wu3Xiangyu Ge4School of Mathematics and Physics, Mianyang Teachers’ College, Mianyang 621000, ChinaSchool of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, ChinaSchool of Finance, Zhongnan University of Economics and Law, Wuhan 430073, ChinaDepartment of Mathematics and Statistics, Curtin University, Perth, WA 6102, AustraliaSchool of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, ChinaIn order to tackle the problem of how investors in financial markets allocate wealth to stochastic interest rate governed by a nested stochastic differential equations (SDEs), this paper employs the Nash equilibrium theory of the subgame perfect equilibrium strategy and propose an extended Hamilton-Jacobi-Bellman (HJB) equation to analyses the optimal control over the financial system involving stochastic interest rate and state-dependent risk aversion (SDRA) mean-variance utility. By solving the corresponding nonlinear partial differential equations (PDEs) deduced from the extended HJB equation, the analytical solutions of the optimal investment strategies under time inconsistency are derived. Finally, the numerical examples provided are used to analyze how stochastic (short-term) interest rates and risk aversion affect the optimal control strategies to illustrate the validity of our results.http://dx.doi.org/10.1155/2020/3153297 |
| spellingShingle | Shuang Li Shican Liu Yanli Zhou Yonghong Wu Xiangyu Ge Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate Journal of Function Spaces |
| title | Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate |
| title_full | Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate |
| title_fullStr | Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate |
| title_full_unstemmed | Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate |
| title_short | Optimal Portfolio Selection of Mean-Variance Utility with Stochastic Interest Rate |
| title_sort | optimal portfolio selection of mean variance utility with stochastic interest rate |
| url | http://dx.doi.org/10.1155/2020/3153297 |
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