A stochastic control approach to portfolio problems with stochastic interest rates. (English) Zbl 1020.93029

Korn, Ralf; Kraft, Holger

SIAM J. Control Optimization 40, No. 4, 1250-1269 (2001).

This paper regards investment problems with investing in a savings account, stocks, and bonds, and maximizing the utility from terminal wealth. Stochastic interest rates are assumed in contrast to the classical Merton model. The corresponding control problem is solved by proving a verification theorem without the usual Lipschitz assumptions.

Reviewer: Klaus Ehemann (Karlsruhe)

MSC:

93E20	Optimal stochastic control
91G80	Financial applications of other theories
60H30	Applications of stochastic analysis (to PDEs, etc.)

Keywords:

optimal portfolios; stochastic interest rate; verification theorem; investment