scholarly journals Optimal investment strategies in a CIR framework

2000 ◽  
Vol 37 (4) ◽  
pp. 936-946 ◽  
Author(s):  
Griselda Deelstra ◽  
Martino Grasselli ◽  
Pierre-François Koehl
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Utility Function ◽  
Closed Form ◽  
Continuous Time ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Optimal Investment Strategy ◽  
Optimal Investment Problem

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.

scholarly journals Optimal investment strategies in a CIR framework

2000 ◽  
Vol 37 (04) ◽  
pp. 936-946 ◽  
Author(s):  
Griselda Deelstra ◽  
Martino Grasselli ◽  
Pierre-François Koehl
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Utility Function ◽  
Closed Form ◽  
Continuous Time ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Optimal Investment Strategy ◽  
Optimal Investment Problem

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.

IMPLICATION OF THE KELLY CRITERION FOR MULTI-DIMENSIONAL PROCESSES

2010 ◽  
Vol 13 (01) ◽  
pp. 93-112 ◽  
Author(s):  
YINGDONG LV ◽  
BERNHARD K. MEISTER
Keyword(s):  
Financial Markets ◽  
Diffusion Processes ◽  
General Setting ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Short Term ◽  
Kelly Criterion ◽  
Optimal Investment Strategy ◽  
Risk Free Rate ◽  
Free Rate

In this paper, we study the Kelly criterion in the continuous time framework building on the work of E.O. Thorp and others. The existence of an optimal strategy is proven in a general setting and the corresponding optimal wealth process is found. A simple formula is provided for calculating the optimal portfolio in terms of drift, short term risk-free rate and correlations for a set of generic multi-dimensional diffusion processes satisfying some simple conditions. Properties of the optimal investment strategy are studied. The paper ends with a short discussion of the implications of these ideas for financial markets.

scholarly journals Robust optimal asset-liability management with penalization on ambiguity

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Yu Yuan ◽  
Hui Mi
Keyword(s):  
Reference Model ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Programming Approach ◽  
Stochastic Dynamic ◽  
Economic Implication ◽  
Investment Strategies ◽  
Dynamic Programming Approach ◽  
Optimal Investment Strategy ◽  
Special Cases

<p style='text-indent:20px;'>In this paper, we study the robust optimal asset- problems for an ambiguity-averse investor, who does not have perfect information in the drift terms of the risky asset and liability processes. Two different kinds of objectives are considered: <inline-formula><tex-math id="M1">\begin{document}$ (i) $\end{document}</tex-math></inline-formula> Maximizing the minimal expected utility of the terminal wealth; <inline-formula><tex-math id="M2">\begin{document}$ (ii) $\end{document}</tex-math></inline-formula> Minimizing the maximal cumulative deviation. The ambiguity in both problems is described by a set of equivalent measures to the reference model. By the stochastic dynamic programming approach and Hamilton-Jacobi-Bellman (HJB) equation, we derive closed-form expressions for the value function and corresponding robust optimal investment strategy in each problem. Furthermore, some special cases are provided to investigate the effect of model uncertainty on the optimal investment strategy. Finally, the economic implication and parameter sensitivity are analyzed by some numerical examples. We also compare the robust optimal investment strategies in two different problems.</p>

scholarly journals Pricing strategy and product quality design with platform-investment

2022 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Xiujing Dang ◽  
Yang Xu ◽  
Gongbing Bi ◽  
Lei Qin
Keyword(s):  
Product Quality ◽  
Value Added ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Profit Sharing ◽  
Investment Strategies ◽  
Contract Term ◽  
Optimal Investment Strategy ◽  
Sustainable Value ◽  
Quality Design

<p style='text-indent:20px;'>With the development of business, more consumers are quality sensitive and improving the product quality becomes particularly important. We mainly discuss two investment strategies: retailer-investment and platform-investment. Compared with non-investment case, only if consumer sensitivity is not too high, it is profitable for the retailer to select retailer-investment. When both retailer-investment and platform-investment are viable, the choice of investment mechanism depends on the profit-sharing ratio. Particularly, if the ratio is within a certain range, the optimal investment strategy is platform-investment, achieving a triple-win outcome. Besides, to effectively alleviate the contradiction between the retailer's moral hazard problem and the sustainable value-added effect of platform-investment, we further research the contract term. These results give us some meaningful management inspirations in investment mechanism.</p>

Analysis of the Possibilities of Using the Wald-Savage Test for the Study of Game Models

2021 ◽  
Vol 9 (4) ◽  
pp. 82-88
Author(s):  
Dmitriy Vlasov
Keyword(s):  
Optimality Criterion ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Optimality Criteria ◽  
Advanced Training ◽  
Investment Strategies ◽  
Optimal Investment Strategy ◽  
Game Matrix ◽  
States Of Nature ◽  
Savage Criterion

Within the framework of this article, the mechanisms for constructing and researching the game model for choosing the investor's optimal investment strategy in various information conditions are disclosed: building many players, building many players' strategies, the option of formalizing the payment function in the form of a game matrix, many optimality criteria, methods of justifying the choice of the strategy optimality criterion. Against the background of the application of classical criteria (Savage criterion, Wald criterion, Hodge-Lehman criterion, Hermeyer criterion), special attention is paid to the analysis of the possibilities of using the integrated Wald-Savage criterion for the study of game models, which allows to smooth the shortcomings of classical criteria and take into account the investor's appetite for risk. Attention is focused on the need to justify the choice of the criterion for the optimality of investment strategies, as well as the need of the researcher to clarify the states of nature and the probabilities of their implementations. The mechanisms for constructing and researching game models presented in this article can be used to improve methodological systems for teaching applied mathematical disciplines at an economic university, to build new variable educational disciplines on modern issues of decision theory, as well as within the framework of the system of advanced training in economics.

scholarly journals Optimal Investment Strategy for Risky Assets

1998 ◽  
Vol 01 (03) ◽  
pp. 377-387 ◽  
Author(s):  
Sergei Maslov ◽  
Yi-Cheng Zhang
Keyword(s):  
Growth Rate ◽  
Brownian Motion ◽  
Continuous Time ◽  
Optimal Strategy ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Risky Assets ◽  
Average Return ◽  
Optimal Investment Strategy

We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of capital that an investor should keep in risky assets as well as weights of different assets in an optimal portfolio. In this approach both average return and volatility of an asset are relevant indicators determining its optimal weight. Our results are particularly relevant for very risky assets when traditional continuous-time Gaussian portfolio theories are no longer applicable.

scholarly journals A Model for the Optimal Investment Strategy in the Context of Pandemic Regional Lockdown

Mathematics ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 1058
Author(s):  
Antoine Tonnoir ◽  
Ioana Ciotir ◽  
Adrian-Liviu Scutariu ◽  
Octavian Dospinescu
Keyword(s):  
Mathematical Model ◽  
Negative Impact ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Economic Consequences ◽  
Decision Makers ◽  
Investment Strategies ◽  
Negative Consequences ◽  
Optimal Investment Strategy ◽  
Proposed Model

The Covid-19 pandemic has generated major changes in society, most of them having a negative impact on the quality of life and income obtained by the population and businesses. The negative consequences have been highlighted in the decrease of the GPD level for regions, countries and even continents. Returning to pre-pandemic levels is a considerable effort for both economic and political decision-makers. This article deals with the construction of a mathematical model for economic aspects in the context of variable productivity in time. Through this mathematical model, we propose to maximize revenues in pandemic conditions, in order to limit the economic consequences of the lockdown. One advantage of the proposed model consists in the fact that it is based on units that can be regions, economic branches, economic units or fields of investment. Another strength of the model is determined by the fact that it offers the possibility to choose between two different investment strategies, based on the specific options of the decision makers: the consistent increase of the state revenues or the amelioration of the disparity phenomenon. Furthermore, our model extends previous approaches from the literature by adding some generalization options and the proposed model can be applied in lockdown cases and seasonal situations.

scholarly journals TheCEVModel and Its Application in a Study of Optimal Investment Strategy

2014 ◽  
Vol 2014 ◽  
pp. 1-7 ◽  
Author(s):  
Aiyin Wang ◽  
Ls Yong ◽  
Yang Wang ◽  
Xuanjun Luo
Keyword(s):  
Optimal Investment ◽  
Investment Strategy ◽  
Legendre Transform ◽  
Investment Strategies ◽  
Approximation Solution ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Optimal Investment Strategy ◽  
Hamilton Jacobi Bellman ◽  
Exponential Utility Function

The constant elasticity of variance (CEV) model is used to describe the price of the risky asset. Maximizing the expected utility relating to the Hamilton-Jacobi-Bellman (HJB) equation which describes the optimal investment strategies, we obtain a partial differential equation. Applying the Legendre transform, we transform the equation into a dual problem and obtain an approximation solution and an optimal investment strategies for the exponential utility function.

scholarly journals Alpha-robust mean-variance investment strategy for DC pension plan with uncertainty about jump-diffusion risk

2020 ◽  
Author(s):  
Danping Li ◽  
Junna BI ◽  
Mengcong Hu
Keyword(s):  
Ambiguity Aversion ◽  
Pension Plan ◽  
Optimal Investment ◽  
Jump Diffusion ◽  
Investment Strategy ◽  
Investment Strategies ◽  
Value Functions ◽  
Defined Contribution ◽  
Optimal Investment Problem ◽  
Mean Variance

This paper considers an alpha-robust optimal investment problem for a defined contribution (DC) pension plan with uncertainty about jump and diffusion risks in a mean-variance framework. Our model allows the pension manager to have different levels of ambiguity aversion, rather than only consider the extremely ambiguity-averse attitude. Moreover, in the DC pension plan, contributions are supposed to be a predetermined amount of money as premiums and the pension funds are allowed to be invested in a financial market which consists of a risk-free asset, and a risky asset satisfying a jump-diffusion process. Notice that a part of pension members could die during the accumulation phase, and their premiums should be withdrawn. Thus, we consider the return of premiums clauses by an actuarial method and assume that the surviving members will share the difference between the return and the accumulation equally. Taking account of the pension fund size and the volatility of the accumulation, a mean-variance criterion as the investment objective for the DC plan can be formulated. By applying a game theoretic framework, the equilibrium investment strategies and the corresponding equilibrium value functions can be obtained explicitly. Economic interpretations are given in the numerical simulation, which is presented to illustrate our results.

CREDIT MARKETS AND INVESTMENT IN RENEWABLE ENERGY UNDER UNCERTAINTY

2016 ◽  
Vol 21 (6) ◽  
pp. 1252-1276 ◽  
Author(s):  
Alexandra Vinogradova
Keyword(s):  
Financial Markets ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Energy Research ◽  
Access To Credit ◽  
Optimal Investment Strategy ◽  
Intertemporal Consumption ◽  
Energy Independence ◽  
Net Foreign Asset ◽  
Relevant Range

The present study examines the problem facing a resource-importing economy seeking to achieve energy independence by developing a renewable substitute. The invention of the substitute is assumed to follow a stochastic process that can be influenced by investment in energy research and development. I analyze the optimal investment strategy under alternative assumptions with respect to the economy's access to international financial markets, the terms on which credit is available, and the country's degree of dependence on resource imports. It is found that, in general, having access to capital markets does not necessarily lead to a higher investment rate. However, in the empirically relevant range of elasticity of intertemporal consumption substitution, the economy with access to credit invests more than under financial autarky. A higher degree of dependence on resource imports implies a lower optimal investment. Arrival of the substitute does not necessarily cause an immediate improvement in the net foreign asset position but may in fact cause its further deterioration.

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