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The CEV Model and Its Application in a Study of Optimal Investment Strategy

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  • Aiyin Wang
  • Ls Yong
  • Yang Wang
  • Xuanjun Luo

Abstract

The constant elasticity of variance ( CEV ) model is used to describe the price of the risky asset. Maximizing the expected utility relating to the Hamilton-Jacobi-Bellman ( HJB ) equation which describes the optimal investment strategies, we obtain a partial differential equation. Applying the Legendre transform, we transform the equation into a dual problem and obtain an approximation solution and an optimal investment strategies for the exponential utility function.

Suggested Citation

  • Aiyin Wang & Ls Yong & Yang Wang & Xuanjun Luo, 2014. "The CEV Model and Its Application in a Study of Optimal Investment Strategy," Mathematical Problems in Engineering, Hindawi, vol. 2014, pages 1-7, August.
    • Handle: RePEc:hin:jnlmpe:317071
    DOI: 10.1155/2014/317071
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