Dynamics Optimal Portfolios with CIR Interest Rate under a Heston Model

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1 Dynamics Optimal Portfolios with CIR Interest Rate under a Heston Model WEI-JIA LIU Tianjin Polytechnic University School of Science Tianjin 3387, CHINA 13938@qq.com SHUN-HOU FAN Tianjin Polytechnic University School of Science Tianjin 3387, CHINA fsh@tjpu.edu.cn HAO CHANG Tianjin Polytechnic University School of Science Tianjin 3387, CHINA ch @16.com Abstract: This paper studies the dynamic portfolios with the Cox-Ingersoll-RossCIR interest rate under a Heston model, which aims at maximizing the expected utility of the terminal wealth. In the model, the manager can invest his weatlh to a zero-coupon, a riskless asset and a. By applying dynamic programming principle, the explicit solutions of optimal portfolio for constant relative risk aversioncrra utility are achieved successfully. Finally, a numerical example is presented to characterize the dynamic behavior of optimal portfolio. Key Words: CIR interest rate; Heston model; CRRA utility; the optimal portfolio; dynamic programming; 1 Introduction In recent years, some people realized that portfolio can disperse risk and increase revenues and has become a hot topic. Nowadays, there are a lot of literatures in studying the problem and the portfolio selection theory has been applied to the investment and consumption problems, DC pension fund and insurance fund management problems, and so on. For example, Markowitz [1] first arouse this problem in 195 and provided a theoretical foundation for modern portfolio selection analysis. Li and Ng [] considered the mean-variance formulation in multi-period framework and first presented an embedding technique to obtain the analytical solution of the efficient and efficient frontier. Zhou and Li [3] studied a continuous-time mean-variance portfolio selection model that is formulated as a bicriteria optimization problem and the problem was seen as a class of auxiliary stochastic linear-quadratic LQ problems. Vigna and Haberman [4] analysed the financial risk in a DC pension scheme and found an optimal investment s- trategy. Gao [5] studied the portfolio optimization of DC pension fund under a CEV model and obtain the closed-form solution of the optimal investment in power and exponential utility case. Li et al.[6] s- tudied the optimal investment problem for utility maximization with taxes, dividends and transaction costs under the CEV model and obtained explicit solutions for the logarithmic, exponential and quadratic utility functions. However, two aspects are worthy to be further explored based on the above-mentioned literatures. On the one hand, the articles above are all derived in the case that the interest rate is constant. In fact, the interest rate is always changing with time, which can reflect the change of interest rates of the market, and there are some term structure models to describe it such as the Vasicek model [7] and the CIR model[8]. So some studies about the portfolio selection problems with stochastic interest rate occurred. For instance, Korn and Kraft [9] used a stochastic control approach to deal with portfolio selection problems with stochastic interest rate and proved a verification theorem. Deelstra et al.[1] studied the optimal investment problems for DC pension fund in a continuous-time framework and assumed that the interest rates follow the affine dynamics, including the CIR model and the Vasicek model. Chang et al.[11] studied an asset and liability management problem with stochastic interest rate in which the interest rate was assumed to be an affine interest rate model. Chang et al. [1] investigated an investment and consumption problem with stochastic interest rate, in which interest rate was assumed to follow the Ho-Lee model and be correlated with price and derived optimal strategies for power and logarithm utility function. Gao [13] investigated the portfolio problem of a pension fund management in a complete financial market with stochastic interest rate. Chang and Lu [14] studied an asset and liability management problem with CIR interest rate dynamics and obtained the closed form solutions to the optimal investment strategies by applying dynamic programming principle and variable change technique. Boulier et al. [15] obtained the optimal E-ISSN: Volume 1, 15

2 for DC pension management with stochastic interest rate. On the other hand, these articles above are all assumed that the volatility is constant. In real world, there exists volatility risk and it is necessarty for us to investigate contiunous-time dynamic portfolio under the volatility risk. One can refer to the work of Heston [16]. Kraft [17] solved the portfolio problem under Heston model and presented a verification result. Li et.al. [18] considered the optimal time-consistent investment and reinsurance for an insurer under Heston model and presented economic implications and numerical sensitivity analysis. In recent years, some scholars are concerned with the optimal investment problems under stochastic interest rate and stochastic volatility. Liu [19] explicitly solved dynamic portfolio choice problem with s- tochastic interest rate and stochastic volatility and p- resented three special applications. However, in this paper, the interest rate, the returns and volatility are all a function of the Markov diffusion factor. Li and Wu [] studied an optimal investment problem where the stochastic interest rate was a CIR model and the volatility was a Heston model. However, in this article above, there is no correlation between interest rate dynamic and price dynamic. Chang and Rong [1] studied an investment and consumption problem with stochastic interest rate and stochastic volatility on the basis of the study of Li and Wu and obtained the optimal investment and consumption strategies. Guan and Liang [] studied the optimal management of a DC pension plan in a stochastic interest rate and stochastic volatility framework and maximized the expectation of the CRRA utility over a guarantee, then derived the optimal strategies of the problem. This paper intends to find the optimal investment of the optimal portfolio for the financial market, in which interest rate is assumed to follow Cox- Intersoll-RossCIR model while the price is supposed to be the Heston s stochastic volatility model. In addition,the financial market consists of three assets: a riskless asset, a zero-coupon and a s- tock. The objective of the manager is to maximize the expected utility of the terminal wealth. By using the principle of stochastic dynamic programming, we derive a complicated non-linear second-order partial differential equation. We assume that the risk preference of the investor satisfy CRRA utility and obtain the explicit solutions for the optimal investment strategies by using variable change technique. Finally, we present a numerical example to investigate more closely the dynamic behavior of the optimal portfolio. The rest of the paper is organized as followed. In section, we introduce the financial market and the wealth process. In section 3, we bring out the optimization criterion and derive the HIB equation. In section 4, we introduce the CRRA utility function and derive the explicit solution of the optimal portfolio. In section 5, we present a numerical application to demonstrate the result and section 6 concludes the paper. The model In this section, we introduce the financial market. We consider a complete and frictionless financial market which is continuously open over the fixed time interval [,T ]. The uncertainty involved by the financial market is described by three standard Brownian motions W r t, W v t and W s t, with t [, T ], defined on a complete probability space Ω, F,P, where P is the real-word probability. The filtration F={F t } is a right continuous filtration of σ algebras on this space that represents the information structure generated by the Brownian motions. E[.] stands for the expected value..1 The financial market We assume that the market is composed of three financial assets, which the manager can buy or sell continuously. The first asset is the riskless asset. We denote the price at time t by S t, which evolves the following equation: ds t = rts tdt, 1 In the one factor CIR model, the interest rate state variable is the short rate itself, which satisfies drt = k 1 k rtdt + σ r rtdwr t, where k 1, k and σ r are constants. The second asset is the zero-coupon with maturity T, whose price at time t is denoted by P t, T, which is described by the following stochastic differential equationreferring to Liu [19]: dp t, T P t, T = rt+bλ 1σ s rtdt+bσ r rtdwr t, 3 where b, λ 1 and σ s are constants. This is derived by Cox, Ingersoll and Ross [8]. The return has a risk premium bλ 1 rt that changes with time t both implicitly through the dependence on rt and explicitly through the dependence on b. The third asset is a, whose price is denoted by S 1 t. Because of its self randomness, the impact E-ISSN: Volume 1, 15

3 of the interest rate and the volatility on the price of the, we assume S 1 t follows referring to Liu [19]: ds 1 t S 1 t = rt + λ svt + λ v σ s λ 1 rtdt + vtdw s t + λ v σ r rtdwr t, where the volatility vt satisfies the Heston model: 4 dvt = k v K v vtdt + σ v vtdwv t, 5 with k v,k v and σ v being positive constants. Here we assume that there is no correlation between the Brownian motions W s t and W r t and between W v t and W r t. The correlation between W s t and W v t is ρ.. Wealth process Once the assets available to the investor have been described, we now model the dynamic investment. Let Xt denote the wealth of the investor at time t [,T], π s t and π B t denote the amount invested in the and the zero-coupon, respectively. Thus, π t = Xt π s t π B t denotes the amount invested in the riskless asset. The dynamics of the wealth process is given by: dxt = Xt π s t π B t ds t S t + π s t ds 1t S 1 t + π dp t, T Bt P t, T. 6 Taking into account 1-5, the evolution of pension wealth can be rewritten as: dxt = Xtrt + π s tλ s V t + π s tλ v σ s λ 1 rt + π B tbσ s λ 1 rt dt + π s t V tdw s t + π s tλ v tσ r rt 3.1 The optimization criterion Definition 1 Admissible Strategy An investment s- trategy πt = π s t, π B t is said to be admissible if the following conditions are satisfied. i π s t and π B t are all F t - measurable. T ii E πstvt + π s tλ v tσ r + π B tbσ r rt dt < + iii the SDE7 has a unique solution according to πt = π s t, π B t. Assume that the set of all admissible strategies is denoted by Π. Under the wealth process denoted by 7, the investor looks for an πst and πb t maximizing the expected utility of the terminal wealth, i.e.: max EUXT, 8 πt Π where u. is strictly concave and satisfies the Inada conditions u + = and u = +. T is the horizon for the fund investment. In this paper, we consider one common utility function, i.e. the CRRA utility function. It is given by Ux = xp, p<1, p. 9 p 3. The optimization program Based on the classical tools of stochastic optimal control, we define the value function: Ht, r, v, x = max E[UXT Xt = x, πt Π rt = r, vt = v], <t<t 1 The maximum principle leads to the following Hamilton-Jacobi-BellmanHJB equation: sup {H t + xtrt + π s tλ s vt πt Π + π B tbσ r rt dw r t. 3 The optimal control 7 In this section, we provide the optimal control program and derive the Hamilton-Jacobi-BellmanHJB equation. + π s tλ v σ s λ 1 rt + π B tbσ s λ 1 rt H x + 1 π s tvt + π s tλ v σ r rt + π B tbσ r rt + k 1 k rth r + 1 σ rrth rr + k v K v vth v + π s tλ v σrrt + π B tbσrrt H xr + 1 σ rvth vv + ρσ v π s tvth xv } =, 11 E-ISSN: Volume 1, 15

4 with HT, r, v, x = Ux, where H t, H v, H x, H r,, H rr, H vv, H xr, H xv denote partial derivatives of first and second orders with t, r, v, x. Then we differentiate 11 with respect to π s t and π B t and obtain two equations : λ s vh x + λ v σ s λ 1 rh x + v π s t + π s tλ v σ r r + πb tbσ r rλv σ r rhxx + λ v σ rrh xr + ρσ v vh xv =, bλ 1 σ s rh x + π s tλ v σ r r + π B tbσ r rbσr rhxx + bσ rrh xr = The first order maximizing conditions for the optimal π s t and π B t can be derived by solving Eq1 and 13: π Bt = λ sλ v σ r λ 1 σ s H x bσ r + ρσ vλ v H xv b H xr b, 14 π st = λ sh x + ρσ v H xv. 15 Putting 14 and 15 in Eq11, a partial differential equation PDE for the value function can be simplified as the following equation: H t + xrh x ρσ vλ s vh x H xv ρ σ vvh xv λ s v + λ 1 σ sr H x σr + λ 1σ s r + λ 1 σ s σ r r H x H xr σ rrh xr + k 1 k rh r + 1 σ rrh rr + k v K v H v + 1 σ rvh vv =. 16 Now the problem turns to solving Eq16 for the value function and replace it into the above two equations 14 and 15 in order to obtain the optimal portfolios. 4 Solution to the optimization problem In this section, we adopt CRRA utility function and conjecture a solution to the equation 16 with the following form: Ht, r, v, x = x ft, r, v, <1, 17 and its boundary condition is ft, r, v = 1. The following partial derivatives are derived according to Eq17: H t = x f t, H x = x 1 f, = 1x f, H v = x f v, H xv = x 1 f v, H xr = x 1 f r, H r = x f r, H vv = x f vv, H rr = x f rr, 18 where f r, f v, f t are the first order derivatives of f respect to r, v and t respectively and the rest represent the second order derivatives about them. Introducing the above derivatives into 16, we derive: + r λ sv 1 λ 1 σ sr σr f + f t 1 λ 1σ s r 1 + k v K v + ρσ vλ s 1 + λ 1σ s σ r r + k 1 k r 1 v f v σ rrfr 1f ρ σ vvf v 1f + 1 σ rrf rr + 1 σ rvf vv =. f r 19 In order to solve the equation, we conjecture ft, r, v as the following form: ft, r, v = e D 1t+D tr+d 3 tv, where D 1 T =, D T =, D 3 T =. Then, f t = D 1 t + D tr + D 3 tvf, f v = D 3 tf, f r = D tf, f rr = D tf, f vv = D3 tf. Thus,we derive: rf D t + λ 1 σ s σ r 1σr 1 D t + D t + vf 1 λ 1σ s + λ 1 σ s σ r 1 k D 3t + 1 σ r + f 1 λ s 1 ρ σ v D 1t + k 1 D t + k v D 3 t 1 ρσ vλ s + K v D3 t D 3 t =, 1 E-ISSN: Volume 1, 15

5 which can be simplified as: in which rfi 1 t + vfi t + fi 3 t =, I 1 t = D t + σ r 1 D t + + λ 1 σ s σ r 1 k λ 1 σ s 1σr 1 λ 1σ s D t, I t =D 3t 1 λ s 1 ρσ vλ s + K v D 3 t + 1 σ r 1 ρ σ v D 3t, 3 4 I 3 t = D 1t + k 1 D t + k v D 3 t. 5 In order to make the equation 1 established constantly, the only need is to make the coefficients of rf,vf and f to be zero, that is: I 1 t =, I t = and I 3 t =. From what we have studied, it is clear that I 1 t = and I t = are the general Riccati equations. Now we turn to solving the three equations. As for I 1 t =, remember 1 = b 1 4a 1 c 1 = 4λ 1σs + λ 1σsσ r 1 + 4k λ 1 σ s 4λ 1σsσ r + σr 1 + k k λ 1 σ s σ r + 1 λ 1σs 6 where a 1 = σ r 1, b 1 = 1 1 [λ 1σ s λ 1 σ s σ r + k 1], c 1 = λ 1 σ s. 1σr as the discriminant of the quadratic function 1 1 σ rd t λ 1 σ s λ 1 σ s σ r + k 1 D t + =. λ 1 σ s 1σ r It is obvious that I 1 t has different solutions depending on whether 1 >, 1 = and 1 <. Now we let 1 >. Then, the quadratic function has two different roots denoted by m 1 and m such that: a 1 D t m 1 D t m = D t, in which m 1 = b 1+ 1 a 1, m = b 1 1 a 1. Now the problem turns to solving the differential equation dd t = adt. m 1 m D t m 1 D t m 7 Then, we integral Eq7 with respect to t from t to T. With a view of the boundary condition above, we derive D t = m m e a 1m 1 m T t 1 m m 1 e a 1m 1 m T t = m m 1 m 1 m e a 1m 1 m T t m 1 m e a. 1m 1 m T t 8 For equation I t =, we have the discriminant = Kv + 1 ρσ vλ s K v + 1 λ sσr Under the condition >, we assume the roots as m 3 and m 4. As we all know, Eq4 is a equation similar to Eq3. Thus, we use the same technique as Eq3 and obtain the explicit solution as follows: D 3 t = m 4 m 4 e a m 3 m 4 T t 1 m 4 m 3 e a m 3 m 4 T t = m 3m 4 m 3 m 4 e a m 3 m 4 T t m 3 m 4 e a, m 3 m 4 T t 9 with a = 1 ρ σv 1 σ r, b = 1 ρσ vλ s + K v, c = λ s 1, m 3 = b + a, m 4 = b a. As for I 3 t =, there is D 1 t = k 1D t k v D 3 t, we integral both the sides with respect to t from t to T and obtain T T D 1 t = k 1 D tdt + k v D 3 tdt. 3 H x = t From the equations above, we can derive that x 1, H xv = xd t 1, t H xr = xd 3t From what has been discussed above, substituting them into Eq14 and 15, we are ready to state the following theorem. E-ISSN: Volume 1, 15

6 Theorem The optimal portfolio under the stochastic interest rate and the stochastic volatility framework with the CRRA utility function is given by: πbt = λ sλ v σr λ 1 σ s 1 1 Xt bσ r + ρσ vλ v b D t 1 Xt 1 b D 3 t 1 Xt, πst = λ s + ρσ v D 3 t Xt 33 1 Remark 3 From the equation3, we note that D t depends on, λ 1, σ s, σ r, k. From equation 4, we can find that D 3 t is related to, λ s, σ v, σ r, ρ, K v. Besides, D 1 t is relevant to k 1, k v, D t and D 3 t, that is to say that D 1 t depends on, λ 1, σ s, σ r, k, λ s, σ v, ρ, K v, k 1, k v. Remark 4 According to Theorem, we find that the optimal amount invested in the zero-coupon depends on λ s, ρ, σ v, λ v, σ r, λ 1, σ s, b,, k and K v, but it doesn t depend on k 1 and k v. However, the fact is that the value of k 1 has effect on the dynamic of interest rate, which greatly affect the price of zero-coupon. It is surprised us. Remark 5 The optimal amount invested in the relies on λ s, ρ, σ v,, σ r and K v, but it isn t related to the parameters λ v, b, λ 1, σ s, k, k 1, k v. 5 Numerical analysis In this section, we provide a numerical example to illustrate the properties of the derived in the previous section. Here we take most of the parameters in Deelstra et al.3. Throughout this section, unless otherwise stated, we assume that the basic parameters are given by k 1 =.1871, k =.339, ρ =.5, b =.7, λ 1 = 1, λ s = 1.5, λ v =.1871, σ 1 =.18, σ s =.15, σ r =.95, σ v =.36, k v = 1., K v =.4, =, t =. Consider that the initial investment amount with x = 1 and the maturity time with T = 1. With the data provided above, we can test and verify that >, then the analysis would be instructive and valuable. Now the figures below give some analysis on the optimal portfolios. First, Fig.1 gives us the trends how the wealth invested in the three assets change with time t on the condition that the other coefficients are decided in advance. As we can see from the picture, there is a positive relationship between the optimal investment t Figure 1: The effect of t on the optimal investment Figure : The effect of on the optimal investment b Figure 3: The effect of b on the optimal investment E-ISSN: Volume 1, 15

7 σ r Figure 4: The effect of σ r on the optimal investment From Figure 5, we can know that the relationship between λ 1 and the optimal investment value π B t and π s t. That is, the investor invests all his money to to avoid risk at first, however, the amount invested in decreases as λ 1 increases. In addition, there is a fixed amount to invest to and the amount of is less than, which indicates that the investor chooses the way of short-selling for to reach the optimal portfolios. Figure 6 illustrates the influence of λ s on the optimal investment. As we can see from the figure, the amount invested in decreases as λ s increases, at the same time, the investment for increases. However, π B t is less than and almost stays unchanged. portfolio in and t. That is, as t runs, so does the optimal amount invested in. However, the optimal amount invested in almost remains unchanged, and the in decreases as time goes by. This indicates that as time t goes on, the investor are told to more position in and shorter position in. In addition, Figure 1 tells us that the amount invested in is negative at the beginning, which indicates that is short-selling, and as time increases, the investor invests some of its wealth into. Figure illustrates that how the parameter of CRRA utility function affects the optimal investment πb t, π st and π t. Figure shows that πb t decreases with respect to the parameter. In other words, for a larger, the amount invested in s- tock is larger. As we know, the degree of risk aversion for investors is 1, that is to say that as increases, the amount invested in will increase. Besides, the part of πb t will become less and that part of the almost stay invariant. Figure 3 shows the relationship between the parameter b and the optimal investment. From Figure 3, the amount that the investor invest in the s- tock remains to be 5, which indicates that the parameter b has no effect on the amount invested in the. However, as b increases, the optimal amount invested in the decreases severely at first and towards s- mooth to a constant around 13. As we can see from Figure 3, the amount invested in is less than zero, which inflects that the investor needs short-selling the. Figure 4 shows us the relationship of σ r and the optimal investment. From the figure, we find that the amount invested in remains to a constant around 65 and the amount of decreases as σ r increases. That is, the interest rate has little influence on the optimal investment for λ 1 Figure 5: The effect of λ 1 on the optimal investment λ s Figure 6: The effect of λ s on the optimal investment 6 Conclusions In this paper, we consider the dynamic portfolios with the CIR interest rate under a Heston model. Our objective aims at maximizing the expected utility of the E-ISSN: Volume 1, 15

8 terminal wealth. The investor has to deal with the risk of both interest rate and volatility. The interest rate obeys the CIR model and the volatility of the is stochastic and follows the Heston s SV model. Here the market consists of three assets, i.e. a riskless asset, a and a. Under the CRRA utility function, we derive the optimal investment strategies. From the numerical analysis, we can conclude that the optimal of is only related to λ s, ρ,, λ s, σ v, σ r, K v. Besides, the optimal amount invested in is irrelevant to k 1 and k v. As far as we know, there are some limits in our study: i in order to obtain the explicit solutions, we only consider the special utility function; ii we only quote the CIR interest rate model and do not study the optimal portfolios with affine interest rate; iii we only consider the simplest but important stochastic volatility model i.e. Heston model; iv we only consider the dynamics asset allocations but not consider the pension fund investment problems and investment and reinsurance problems. In our future works, we will relax these limits and extend them in the more general market environments. However, in the context of these limitations, our paper also has its value: i we obtain the explicit solutions for the optimal asset allocation problem with CIR interest rate under a Heston model; ii we analyze the optimal portfolios via some numerical examples, and at the same time we interpret its economic meanings in real market. Acknowledgements: We would like to thank anonymous reviewers for their instructive comments and valuable suggestions. This research is supported by China Postdoctoral Science Foundation Funded Project No.14M56185, Applied Basis and advanced technology Research Programs of Tianjin No. 15JCQNJC4 and Humanities and Social Science Research Youth Foundation of Ministry of Education of China No.11YJC796. References: [1] H. Markowitz, Portfolio selection, Journal of Finance. 7, 195, pp [] D. Li and W.L. Ng, Optimal dynamic portfolio selection: multi-period mean-variance formulation, Mathematical Finance. 1,, pp [3] X.Y. Zhou and D. Li, Continuous time meanvariance portfolio selection: A stochastic LQ framework, Applied Mathematics and Optimization. 4,, pp [4] E. Vigna and S. Haberman, Optimal investment for defined contribution pension schemes, Insurance: Mathematics and Economics. 8, 1, pp [5] J.W. Gao, Optimal portfolios for DC pension plans under a CEV model, Insurance: Mathematics and Economics. 44, 9, pp [6] D.P. Li, X.M. Rong and H. Zhao, Optimal investment problem with taxes, dividends and transaction costs under the constant elasticity of variance CEV model, WSEAS Transactions on Mathematicas. 1, 13, pp [7] O.A. Vasicek, An equilibrium characterization of the term structure, Journal of Financial Economics. 5, 1977, pp [8] J.C. Cox, J.E. Ingersoll and S.A. Ross, A theory of the term structure of interest rates, Econometrica. 53, 1985, pp [9] R. Korn and H. Kraft, A stochastic control approach to portfolio problems with stochastic interest rates, SIAM Journal of Control and optimization. 4, 1, pp [1] G. Deelstra, M. Grasselli and P.F. Koehl, Optimal investment strategies in the presence of a minimum guarantee, Insurance: Mathematics and Economics. 33, 3, pp [11] H. Chang, K. Chang and J.M. Lu, Portfolio selection with liability and affine interest rate in the HARA utility framework, Abstract and Applied Analysis. 14, 14, pp [1] H. Chang, X.M. Rong and H. Zhao, Optimal investment and consumption decisions under the Ho-Lee interest rate model, WSEAS Transactions on Mathematics. 1, 13, pp [13] J. Gao, Stochastic optimal control of DC pension funds, Insurance: Mathematics and Economics. 4, 8, pp [14] H. Chang and J.M. Lu, Utility portfolio optimization with liability and multiple risky assets under the extended CIR model, WSEAS Transactions on Systems and Control. 9, 14, pp [15] J.F. Boulier, S.J. Huang and G. Taillard, Optimal management under stochastic interest rates: the case of a protected defined contribution pension fund, Insurance: Mathematics and Economics. 8, 1, pp [16] S.L. Heston, A closed-form solution for options with stochastic volatility with applications to and currency options, Review of Financial Studies. 6, 1993, pp [17] H. Kraft, Optimal portfolios and Heston s s- tochastic volatility model: an explicit solution for power utility. Quantitative Finance. 5, 5, pp E-ISSN: Volume 1, 15

9 [18] Z.F. Li, Y. Zeng and Y.Z. Lai, Optimal timeconsistent investment and reinsurance strategies for insurers under Heston s SV model, Insurance: Mathematics and Economics. 51, 1, pp [19] J. Liu, Portfolio selection in stochastic environments, The Review of Financial Studies., 7, pp [] J.Z. Li and R. Wu, Optimal investment problem with stochastic interest rate and stochastic volatility: maximizing a power utility, Applied Stochastic Models in Business and Industry. 5, 9, pp [1] H. Chang and X.M. Rong, An investment and consumption problem with CIR interest rate and stochastic volatility, Abstract and Applied Analysis. 13, 13, pp [] G.H. Guan and Z.X. Liang, Optimal management of DC pension plan in a stochastic interest rate and stochastic volatility framework, Insurance: Mathematics and Economics. 57, 14, p- p E-ISSN: Volume 1, 15

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