On optimal portfolio choice under stochastic interest rates

Lioui, Abraham; Poncet, Patrice

doi:10.1016/s0165-1889(00)00005-1

Cited by 79 publications

(44 citation statements)

References 31 publications

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“…1 For the method called "martingale approach" the reader is referred to Huang (1989, 1991), and Lioui and Poncet (2000). We just underline that in this work we are able to reach the same qualitative results as Lioui and Poncet even if they do not consider any background risk.…”

Section: Introductionsupporting

confidence: 56%

“…In the work by Lioui and Poncet (2000) it is shown that, if the market is complete, then the third component of the optimal portfolio is formed only by two parts, even though the number of state variables is arbitrarily large. In particular, the first part is associated with the interest rate risk and the second one with the market price of risk.…”

Section: The Third Component Of Optimal Portfoliomentioning

confidence: 99%

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Optimal portfolio and background risk: an exact and an approximated solution

Menoncin

2002

Insurance: Mathematics and Economics

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This paper analyses the portfolio problem of an investor who wants to maximize the expected exponential utility of his terminal wealth both in a complete and an incomplete financial market. The investor must cope with a set of stochastic investment opportunities and two sets of background risks. If the market is complete we are able to find an exact solution. Instead, if the market is incomplete, we suggest an approximated general solution. Contrary to other exact solutions obtained in the literature, all our results are obtained without specifying any particular functional form for the stochastic variables involved in the problem.JEL classification: G11, C61.

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Section: Introductionsupporting

confidence: 56%

Section: The Third Component Of Optimal Portfoliomentioning

confidence: 99%

Optimal portfolio and background risk: an exact and an approximated solution

Menoncin

2002

Insurance: Mathematics and Economics

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“…Portfolio optimization with stochastic interest rates are e.g. treated in [17] and [14]. The authors of [14] consider the Ho-Lee and the Vasicek model for the interest rate which are both diffusion processes.…”

Section: Introductionmentioning

confidence: 99%

Portfolio Optimization With Markov-Modulated Stock Prices and Interest Rates

Bäuerle

Rieder

2004

IEEE Trans. Automat. Contr.

125

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Abstract-A financial market with one bond and one stock is considered where the risk free interest rate, the appreciation rate of the stock and the volatility of the stock depend on an external finite state Markov chain. We investigate the problem of maximizing the expected utility from terminal wealth and solve it by stochastic control methods for different utility functions. Due to explicit solutions it is possible to compare the value function of the problem to one where we have constant (average) market data. The case of benchmark optimization is also considered.

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“…The main references for the martingale approach are Huang (1989, 1991). A more recent application of this technique can be found, for instance, in Lioui and Poncet (2001). We take Problem (15) with the utility function U (c) = 1 1−δ c(t) 1−δ .…”

Section: A4 the Solution For The Crra Casementioning

confidence: 99%

The role of longevity bonds in optimal portfolios

Menoncin

2008

Insurance: Mathematics and Economics

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On optimal portfolio choice under stochastic interest rates

Cited by 79 publications

References 31 publications

Optimal portfolio and background risk: an exact and an approximated solution

Optimal portfolio and background risk: an exact and an approximated solution

Portfolio Optimization With Markov-Modulated Stock Prices and Interest Rates

The role of longevity bonds in optimal portfolios

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