Abstract
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitals to maximize the expected long-term growth rate of a utility function of the wealth. When the bond has a constant interest rate, three models for the underlying stock price processes are studied: Heston model, 3/2 model, and jump diffusion model. We also study the optimal strategies for a portfolio in which the stock price process follows a Black-Scholes model and the bond process has a Vasicek interest rate that is correlated to the stock price.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 300-318 |
| Number of pages | 19 |
| Journal | Stochastic Models |
| Volume | 30 |
| Issue number | 3 |
| DOIs | |
| State | Published - Jul 3 2014 |
Bibliographical note
Funding Information:The author is supported by NSF grant DMS-0904701, DARPA grant, and MacCracken Fellowship at New York University.
Keywords
- 3/2 model
- Heston model
- Jump diffusion
- Long-term growth rate
- Optimal strategies
- Vasicek model