A Stochastic Control Approach to Portfolio Problems with Stochastic Interest Rates

Authors:
Ralf Korn;Holger Kraft
Affiliations:
-;-
Venue:
SIAM Journal on Control and Optimization
Year:
2001

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Abstract

We consider investment problems where an investor can invest in a savings account, stocks, and bonds and tries to maximize her utility from terminal wealth. In contrast to the classical Merton problem, we assume a stochastic interest rate. To solve the corresponding control problems it is necessary to prove a verification theorem without the usual Lipschitz assumptions.