English, Article edition: STOCHASTIC PORTFOLIO OPTIMIZATION WITH LOG UTILITY TAO PANG

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Bookmark: http://trove.nla.gov.au/version/83039
Physical Description
  • article
Language
  • English

Edition details

Title
  • STOCHASTIC PORTFOLIO OPTIMIZATION WITH LOG UTILITY
Author
  • TAO PANG
Physical Description
  • article
Notes
  • A portfolio optimization problem on an infinite time horizon is considered. Risky asset price obeys a logarithmic Brownian motion, and the interest rate varies according to an ergodic Markov diffusion process. Moreover, the interest rate fluctuation is correlated with the risky asset price fluctuation. The goal is to choose optimal investment and consumption policies to maximize the infinite horizon expected discounted log utility of consumption. A dynamic programming principle is used to derive the dynamic programming equation (DPE). The explicit solutions for optimal consumption and investment control policies are obtained. In addition, for a special case, an explicit formula for the value function is given.
  • Portfolio optimization, dynamic programming equations, subsolution and supersolutions
  • RePEc:wsi:ijtafx:v:09:y:2006:i:06:p:869-887
Language
  • English
Contributed by
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