Dynamic mean-variance portfolio selection with borrowing constraint

Chenpeng Fu, Ali Lari-Lavassani and Xun Li

European Journal of Operational Research, 2010, vol. 200, issue 1, 312-319

Abstract: This paper derives explicit closed form solutions, for the efficient frontier and optimal investment strategy, for the dynamic mean-variance portfolio selection problem under the constraint of a higher borrowing rate. The method used is the Hamilton-Jacobi-Bellman (HJB) equation in a stochastic piecewise linear-quadratic (PLQ) control framework. The results are illustrated on an example.

Keywords: Continuous-time; finance; Optimal; portfolio; Mean-variance; portfolio; selection; Borrowing; rate; Efficient; frontier; Stochastic; PLQ; control; HJB; equation (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:200:y:2010:i:1:p:312-319

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