Portfolio Selection with the Extended CIR Model in the Utility Framework

摘要

This paper studies a continuous-time dynamic portfolio selection problem with multiple risky assets in the utility framework, where we assume that the financial market is composed of one risk-free asset, multiple risky assets and one zero-coupon bond, and short rate is driven by the CIR model. By using dynamic programming principle and solving corresponding Hamilton-Jacobi-Bellman (HJB) equation, we obtain the optimal portfolios for power utility and exponential utility. In addition, we obtain the closed-form solutions to the optimal portfolios under Hyperbolic Absolute Risk Aversion (HARA) utility, which covers power utility, exponential utility and logarithm utility as special cases.