Optimal Investment Problem with Multiple Risky Assets under the Constant Elasticity of Variance (CEV) Model

Hui Zhao, Ximin Rong, Weiqin Ma, Bo Gao

School of Science, Tianjin University, Tianjin, China.

DOI: 10.4236/me.2012.36092                

Abstract

This paper studies the optimal investment problem for utility maximization with multiple risky assets under the constant elasticity of variance (CEV) model. By applying stochastic optimal control approach and variable change technique, we derive explicit optimal strategy for an investor with logarithmic utility function. Finally, we analyze the properties of the optimal strategy and present a numerical example.

Keywords

Constant Elasticity of Variance Model; Stochastic Optimal Control; Hamilton-Jacobi-Bellman Equation; Portfolio Selection; Multiple Risky Assets; Stochastic Volatility

Conflicts of Interest

The authors declare no conflicts of interest.

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