Statistics and Its Interface
Volume 9 (2016)
An application of stochastic control theory to a bank portfolio choice problem
Pages: 69 – 77
This paper presents an application of stochastic control theory to a bank portfolio choice problem. By applying a dynamic programming principle, we find a closed form solution for the CRRA utility function. A case study is given to illustrate our results and analyze the effect of the parameters on the optimal asset allocation strategy.
bank portfolio, stochastic optimal control, dynamic programming principle, CRRA utility