- Volume 19 Issue 4
DOI QR Code
OPTIMAL PORTFOLIO SELECTION UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES
- KIM, MI-HYUN (KIS PRICING) ;
- KIM, JEONG-HOON (DEPARTMENT OF MATHEMATICS, YONSEI UNIVERSITY) ;
- YOON, JI-HUN (DEPARTMENT OF MATHEMATICS, PUSAN NATIONAL UNIVERSITY)
- Received : 2015.09.30
- Accepted : 2015.11.27
- Published : 2015.12.25
Although, in general, the random fluctuation of interest rates gives a limited impact on portfolio optimization, their stochastic nature may exert a significant influence on the process of selecting the proportions of various assets to be held in a given portfolio when the stochastic volatility of risky assets is considered. The stochastic volatility covers a variety of known models to fit in with diverse economic environments. In this paper, an optimal strategy for portfolio selection as well as the smoothness properties of the relevant value function are studied with the dynamic programming method under a market model of both stochastic volatility and stochastic interest rates.
Supported by : National Research Foundation of Korea
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