Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function

The optimal investment problem is a hot field of financial risk control. The analytical solution of investment strategy can be obtained with the power function utility and exponential function utility when the stock price obeys the constant elasticity of variance (CEV) model. However, different inve...

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Autores principales:	Yu Jia, Liyun Su, Yong He, Qi Huang
Formato:	article
Lenguaje:	EN
Publicado:	Hindawi Limited 2021
Materias:	Engineering (General). Civil engineering (General) TA1-2040 Mathematics QA1-939
Acceso en línea:	https://doaj.org/article/2fde6965fc81464fba55ceafeb1d6dc9
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spelling	oai:doaj.org-article:2fde6965fc81464fba55ceafeb1d6dc92021-11-15T01:19:16ZAsymptotic Portfolio Strategy Based on the CEV Model with General Utility Function1563-514710.1155/2021/2899277https://doaj.org/article/2fde6965fc81464fba55ceafeb1d6dc92021-01-01T00:00:00Zhttp://dx.doi.org/10.1155/2021/2899277https://doaj.org/toc/1563-5147The optimal investment problem is a hot field of financial risk control. The analytical solution of investment strategy can be obtained with the power function utility and exponential function utility when the stock price obeys the constant elasticity of variance (CEV) model. However, different investors have different risk preferences; it means that different investors have different utility functions. In this paper, we propose an asymptotic analysis method to obtain the asymptotic solution of investment strategy with the general utility function. The value function is expanded in the form of series, the expressions of the zero-order term and first-order term of the series expansion are derived, respectively, and the error between the asymptotic approximation and the optimal value function is calculated. Finally, the numerical examples provide comparative analysis between the analytical solution and the asymptotic solution to verify the effectiveness of the proposed method.Yu JiaLiyun SuYong HeQi HuangHindawi LimitedarticleEngineering (General). Civil engineering (General)TA1-2040MathematicsQA1-939ENMathematical Problems in Engineering, Vol 2021 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Engineering (General). Civil engineering (General) TA1-2040 Mathematics QA1-939
spellingShingle	Engineering (General). Civil engineering (General) TA1-2040 Mathematics QA1-939 Yu Jia Liyun Su Yong He Qi Huang Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
description	The optimal investment problem is a hot field of financial risk control. The analytical solution of investment strategy can be obtained with the power function utility and exponential function utility when the stock price obeys the constant elasticity of variance (CEV) model. However, different investors have different risk preferences; it means that different investors have different utility functions. In this paper, we propose an asymptotic analysis method to obtain the asymptotic solution of investment strategy with the general utility function. The value function is expanded in the form of series, the expressions of the zero-order term and first-order term of the series expansion are derived, respectively, and the error between the asymptotic approximation and the optimal value function is calculated. Finally, the numerical examples provide comparative analysis between the analytical solution and the asymptotic solution to verify the effectiveness of the proposed method.
format	article
author	Yu Jia Liyun Su Yong He Qi Huang
author_facet	Yu Jia Liyun Su Yong He Qi Huang
author_sort	Yu Jia
title	Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
title_short	Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
title_full	Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
title_fullStr	Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
title_full_unstemmed	Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function
title_sort	asymptotic portfolio strategy based on the cev model with general utility function
publisher	Hindawi Limited
publishDate	2021
url	https://doaj.org/article/2fde6965fc81464fba55ceafeb1d6dc9
work_keys_str_mv	AT yujia asymptoticportfoliostrategybasedonthecevmodelwithgeneralutilityfunction AT liyunsu asymptoticportfoliostrategybasedonthecevmodelwithgeneralutilityfunction AT yonghe asymptoticportfoliostrategybasedonthecevmodelwithgeneralutilityfunction AT qihuang asymptoticportfoliostrategybasedonthecevmodelwithgeneralutilityfunction
_version_	1718428973173571584

Asymptotic Portfolio Strategy Based on the CEV Model with General Utility Function

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