Discrete-time mean-variance portfolio optimization with Markov switching parameters

In this paper, a discrete-time version of the multi-period mean-variance portfolio selection problem in which the market parameters are subjected to a random regime switching is investigated. We analytically derive an optimal control policy for this mean-variance formulation in a closed form. Such a...

Full description

Saved in:
Bibliographic Details
Main Authors: Araujo, M.V., do Valle Costa, O.L.
Format: Conference Proceeding
Language:English
Subjects:
Brazil Council
Difference equations
Financial management
Investments
Mood
Optimal control
Portfolios
Riccati equations
Stochastic processes
Uncertainty
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In this paper, a discrete-time version of the multi-period mean-variance portfolio selection problem in which the market parameters are subjected to a random regime switching is investigated. We analytically derive an optimal control policy for this mean-variance formulation in a closed form. Such a policy can be obtained by the solution of a set of interconnected Riccatti difference equations. Additionally, an explicit expression for the efficient frontier corresponding to this control law is identified and a numerical example with Brazilian assets is presented
ISSN:0743-1619
2378-5861
DOI:10.1109/ACC.2006.1655475