Multi-Period Portfolio Selection with Stochastic Investment Horizon

Lan Yi ()
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Lan Yi: Jinan University

Chapter Chapter 12 in Optimization and Control for Systems in the Big-Data Era, 2017, pp 217-241 from Springer

Abstract: Abstract It is often the case that some unexpected events may force an investor to terminate her investment and exit the financial market. In this work, the mean-variance formulation of multi-period portfolio optimization with stochastic investment horizon is considered. Given the distribution of the uncertain investment horizon, the problem under investigation can be formulated as a nonseparable dynamic problem. By making use of the embedding technique of Li and Ng (Math Financ 4(2):387–406, 2000), an analytical optimal strategy and an analytical expression of the mean-variance efficient frontier for the mean-variance formulation of the problem are achieved. Two special cases are also discussed in this work.

Keywords: Multi-period; Mean-variance portfolio optimization; Stochastic investment horizon; Embedding technique; Dynamic programming (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-3-319-53518-0_12

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DOI: 10.1007/978-3-319-53518-0_12

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