Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1707511 | Applied Mathematics Letters | 2016 | 5 Pages |
Abstract
Selecting optimal asset allocation and consumption strategies is an important, but difficult, topic in modern finance. The dynamics is governed by a nonlinear partial differential equation. Stochastic volatility adds further complication. Even to obtain a numerical solution is challenging. Here, we develop a closed-form approximate solution. We show that our theoretical predictions for the optimal asset allocation strategy and the optimal consumption strategy are in surprisingly good agreement with the results from full numerical computations.
Related Topics
Physical Sciences and Engineering
Engineering
Computational Mechanics
Authors
Qiang Zhang, Lei Ge,