Pricing American interest rate options under the jump-extended constant-elasticity-of-variance short rate models

2012 ◽  
Vol 36 (1) ◽  
pp. 151-163 ◽  
Author(s):  
Natalia Beliaeva ◽  
Sanjay Nawalkha
Keyword(s):  
Interest Rate ◽  
Constant Elasticity ◽  
Interest Rate Options ◽  
Constant Elasticity Of Variance ◽  
American Interest ◽  
Short Rate Models

Pricing American Interest Rate Options under the Jump-Extended Vasicek Model

2008 ◽  
Vol 16 (1) ◽  
pp. 29-43 ◽  
Author(s):  
Natalia A. Beliaeva ◽  
Sanjay K. Nawalkha ◽  
Gloria M. Soto
Keyword(s):  
Interest Rate ◽  
Vasicek Model ◽  
Interest Rate Options ◽  
American Interest ◽  
Extended Vasicek Model

scholarly journals Portfolio Strategy for an Investor with Logarithm Utility and Stochastic Interest Rate under Constant Elasticity of Variance Model

2020 ◽  
pp. 186-196
Author(s):  
Edikan E. Akpanibah ◽  
Udeme Ini
Keyword(s):  
Interest Rate ◽  
Optimal Portfolio ◽  
Risky Asset ◽  
Stochastic Interest Rate ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Portfolio Strategy ◽  
Expansion Technique ◽  
Stochastic Interest

This paper is aim at maximizing the expected utility of an investor’s terminal wealth; to achieve this, we study the optimal portfolio strategy for an investor with logarithm utility function under constant elasticity of variance (CEV) model in the presence of stochastic interest rate. A portfolio comprising of one risk free asset and one risky asset is considered where the risk free interest rate follows the Cox- Ingersoll-Ross (CIR) model and the risky asset is modelled by CEV. Using power transformation, change of Variable and asymptotic expansion technique, an explicit solution of the optimal portfolio strategy and the Value function is obtained. Furthermore, numerical simulations are presented to study the effect of some parameters on the optimal portfolio strategy under stochastic interest rate.

scholarly journals On The Closed Form Strategies of an Investor under the CEV and CIR Processes

2021 ◽  
Vol 7 (1) ◽  
pp. 87-107
Author(s):  
Edikan Akpanibah ◽  
◽  
Bright Osu ◽  
Everestus Eze ◽  
Chidi Okonkwo ◽  
...  
Keyword(s):  
Interest Rate ◽  
Absolute Risk ◽  
Optimal Investment ◽  
Explicit Solutions ◽  
Constant Elasticity ◽  
Risky Assets ◽  
Constant Elasticity Of Variance ◽  
Variable Approach ◽  
Cir Process ◽  
The Interest Rate

In this paper, the explicit solutions of the optimal investment plans of an investor with exponential utility function exhibiting constant absolute risk aversion (CARA) under constant elasticity of variance (CEV) and stochastic interest rate is studied. A portfolio comprising of a risk-free asset modelled by the Cox-Ingersoll-Ross (CIR) process and two risky assets modelled by the CEV process is considered, where the instantaneous volatilities of the two risky assets form a 2 x 2 matrix n = {np,q}2x2 such that nnT is positive definite. Using the power transformation and change of variable approach with asymptotic expansion technique, explicit solutions of the optimal investment plans are found. Moreover, numerical simulations are used to study the effects of the interest rate, elasticity parameter, correlation coefficient and the risk averse coefficient on the optimal investment plans.

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