Abstract:

With the development of interest rate liberalization in China, the stochastic volatility of interest rates will exert significant influence on the investor's optimal investment strategy. Besides, with the improvement of our insurance market, the investor has paid a lot of attention to the life insurance purchase, so the optimal strategy of the investor will change a lot; This paper studies the optimal consumption-investment-insurance purchase strategy under the condition of stochastic interest rate driven by Vasicek Model. The objective of the investor is to maximize the expected discount utility. With the method of Legendre transform, we get the closed-form solution to the optimal consumption-investment-insurance purchase strategy. By means of numerical analysis, the effects of the changes of variables on the optimal portfolio and life insurance strategy are analyzed.

Key words: optimal investment-consumption, insurance purchase, vasicek Model, HARA utility function, legendre transform