Abstract
This paper studies the optimal investment strategies under the dynamic elasticity of variance (DEV) model which maximize the expected utility of terminal wealth. The DEV model is an extension of the constant elasticity of variance model, in which the volatility term is a power function of stock prices with the power being a nonparametric time function. It is not possible to find the explicit solution to the utility maximization problem under the DEV model. In this paper, a dual-control Monte-Carlo method is developed to compute the optimal investment strategies for a variety of utility functions, including power, non-hyperbolic absolute risk aversion and symmetric asymptotic hyperbolic absolute risk aversion utilities. Numerical examples show that this dual-control Monte-Carlo method is quite efficient.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
