Dynamic asset allocation under VaR constraint （VaR约束下的动态资产配置）.pdf

Dynamic asset allocation under VaR constraint with stochastic interest rates. Donatien Hainaut December 6, 2008 Institut des sciences actuarielles. Université Catholique de Louvain (UCL). 1348 Louvain-La-Neuve, Belgium. Abstract This paper addresses the problem of dynamic asset allocation under a bounded shortfall risk in a market composed of three assets: cash, stocks and a zero coupon bond. The dy- namics of the instantaneous short rates is driven by a Hull and White model. In this setting, we determine and compare optimal investment strategies maximizing the CRRA utility of terminal wealth with and without value at risk constraint. JEL classification : G11 Keywords : asset allocation, value at risk, bounded shortfall risk, stochastic interest rates. 1 Introduction. The issue of optimal asset allocation for an investor with given utility function and a xed initial endowment is one of the classical problems in nancial mathematics. Since Mertons pioneering work (1969, 1971), many attempts have been made to solve the asset allocation problem in a framework that allows more realistic market models. In particular, stochastic term structures for the interest rates were introduced. General non explicit results were rst inferred by Karatzas et al. (1987), Karatzas (1989). Afterwards, many authors have obtained closed form solutions for some term structure models. E.g. Korn and Kraft (2001) have investigated the case were interest rates follow a Vasicek and Ho Lee model, using stochastic control techniques. Sørensen (1999), Deelstra et al. (2003) studied a similar problem by the