skip to main content

SciTech ConnectSciTech Connect

Title: Continuous-Time Mean-Variance Portfolio Selection with Random Horizon

This paper examines the continuous-time mean-variance optimal portfolio selection problem with random market parameters and random time horizon. Treating this problem as a linearly constrained stochastic linear-quadratic optimal control problem, I explicitly derive the efficient portfolios and efficient frontier in closed forms based on the solutions of two backward stochastic differential equations. Some related issues such as a minimum variance portfolio and a mutual fund theorem are also addressed. All the results are markedly different from those in the problem with deterministic exit time. A key part of my analysis involves proving the global solvability of a stochastic Riccati equation, which is interesting in its own right.
Authors:
 [1]
  1. Shandong University, School of Mathematics (China)
Publication Date:
OSTI Identifier:
22309138
Resource Type:
Journal Article
Resource Relation:
Journal Name: Applied Mathematics and Optimization; Journal Volume: 68; Journal Issue: 3; Other Information: Copyright (c) 2013 Springer Science+Business Media New York; http://www.springer-ny.com; Country of input: International Atomic Energy Agency (IAEA)
Country of Publication:
United States
Language:
English
Subject:
71 CLASSICAL AND QUANTUM MECHANICS, GENERAL PHYSICS; CALCULATION METHODS; MATHEMATICAL SOLUTIONS; OPTIMIZATION; RANDOMNESS; RICCATI EQUATION; STOCHASTIC PROCESSES