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The finite-time horizon/Stochastic interest rate - Jeanblanc-Shiryaev model


Barth, Andrea; Moreno, Santiago; Reichmann, Oleg (2013). The finite-time horizon/Stochastic interest rate - Jeanblanc-Shiryaev model. NCCR FINRISK Working Paper Series 859, University of Zurich.

Abstract

In this paper the optimal consumption strategy of an investor who owns a fixed sized risky project is studied. The cash flows generated by the risky project follow an arithmetic Brownian motion, and the investor earns interest on cash reserves. The short-rate may be stochastic, and the time horizon may be finite. This results in a family of Hamilton-Jacobi-Bellman variational inequalities that include PDEs whose solutions must be approximated numerically. To do so an finite element approximation and a time marching scheme are employed.

In this paper the optimal consumption strategy of an investor who owns a fixed sized risky project is studied. The cash flows generated by the risky project follow an arithmetic Brownian motion, and the investor earns interest on cash reserves. The short-rate may be stochastic, and the time horizon may be finite. This results in a family of Hamilton-Jacobi-Bellman variational inequalities that include PDEs whose solutions must be approximated numerically. To do so an finite element approximation and a time marching scheme are employed.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 July 2013
Deposited On:03 Mar 2014 08:02
Last Modified:05 Apr 2016 17:44
Series Name:NCCR FINRISK Working Paper Series
Official URL:http://www.zora.uzh.ch/93704/
Related URLs:http://www.nccr-finrisk.uzh.ch/wps.php?action=query&id=859
Other Identification Number:merlin-id:9226
Permanent URL: https://doi.org/10.5167/uzh-93704

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