Robust Optimal Portfolio Choice Under Markovian Regime-switching Model

Robert J. Elliott () and Tak Kuen Siu
Additional contact information
Robert J. Elliott: University of Calgary

Methodology and Computing in Applied Probability, 2009, vol. 11, issue 2, 145-157

Abstract: Abstract We investigate an optimal portfolio selection problem in a continuous-time Markov-modulated financial market when an economic agent faces model uncertainty and seeks a robust optimal portfolio strategy. The key market parameters are assumed to be modulated by a continuous-time, finite-state Markov chain whose states are interpreted as different states of an economy. The goal of the agent is to maximize the minimal expected utility of terminal wealth over a family of probability measures in a finite time horizon. The problem is then formulated as a Markovian regime-switching version of a two-player, zero-sum stochastic differential game between the agent and the market. We solve the problem by the Hamilton-Jacobi-Bellman approach.

Keywords: Robust optimal portfolio; Utility maximization; Model uncertainty; Stochastic differential game; Change of measures; 91A15; 91A40; 91B28; 93E20 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1007/s11009-008-9085-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:metcap:v:11:y:2009:i:2:d:10.1007_s11009-008-9085-3

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/11009

DOI: 10.1007/s11009-008-9085-3

Access Statistics for this article

Methodology and Computing in Applied Probability is currently edited by Joseph Glaz

More articles in Methodology and Computing in Applied Probability from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().