Continuous-time mean-variance portfolio selection under non-Markovian regime-switching model with random horizon

Tian Chen, Ruyi Liu and Zhen Wu

Papers from arXiv.org

Abstract: In this paper, we consider a continuous-time mean-variance portfolio selection with regime-switching and random horizon. Unlike previous works, the dynamic of assets are described by non-Markovian regime-switching models in the sense that all the market parameters are predictable with respect to the filtration generated jointly by Markov chain and Brownian motion. We formulate this problem as a constrained stochastic linear-quadratic optimal control problem. The Markov chain is assumed to be independent of the Brownian motion. So the market is incomplete. We derive closed-form expressions for both the optimal portfolios and the efficient frontier. All the results are different from those in the problem with fixed time horizon.

Date: 2022-05
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2205.06434

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