Mean-Variance Control

Tomas Bjork, Mariana Khapko () and Agatha Murgoci ()
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Mariana Khapko: University of Toronto
Agatha Murgoci: Ørsted

Chapter Chapter 18 in Time-Inconsistent Control Theory with Finance Applications, 2021, pp 179-193 from Springer

Abstract: Abstract In this chapter we will consider dynamic mean-variance optimization. This is a continuous-time version of a standard Markowitz investment problem, where we penalize the risk undertaken by the conditional variance. In Sect. 18.1 we first consider the simplest possible case of a Wiener driven single risky asset and re-derive the corresponding results of Basak and Chabakauri (Rev. Financ. Stud. 23:2970–3016, 2010). We then extend the model in Sect. 18.2 and study the case when the risky asset is driven by a point process as well as by a Wiener process. In Sect. 18.3, we study mean-variance portfolio choice with wealth-dependent preferences.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-030-81843-2_18

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DOI: 10.1007/978-3-030-81843-2_18

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