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Dynamic mean-downside risk portfolio selection with a stochastic interest rate in continuous-time.
- Source :
-
Journal of Computational & Applied Mathematics . Aug2023, Vol. 427, pN.PAG-N.PAG. 1p. - Publication Year :
- 2023
-
Abstract
- Even though it has long been agreed that the interest rate is driven by a stochastic process, most of the existing studies on dynamic mean-downside risk portfolio optimization problem focuses on deterministic interest rates. This work investigates a continuous-time mean-downside risk portfolio optimization problem with a stochastic interest rate. More specifically, we introduce the Vasicek interest rate model and choose some common downside risk measures to model our risk measures, such as, the lower-partial moments(LPM), value-at-risk(VaR) and conditional value-at-risk(CVaR). By using the martingale method and the inverse Fourier Transformation, we successfully derive the semi-analytical optimal portfolio policies and the optimal wealth processes for the mean-downside risk measures with stochastic interest rate. Finally, we provide some illustrative examples to show how the stochastic interest rate affects the investment behavior of investors with mean-downside risk preferences. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 03770427
- Volume :
- 427
- Database :
- Academic Search Index
- Journal :
- Journal of Computational & Applied Mathematics
- Publication Type :
- Academic Journal
- Accession number :
- 162386830
- Full Text :
- https://doi.org/10.1016/j.cam.2023.115103