Constrained Monotone Mean-Variance Problem with Random Coefficients

DOI10.1137/22M154418XMaRDI QIDQ6169625zbMATH OpenFDO

Authors Ying Hu, Xiao-Min Shi, Zuo Quan Xu

Publication date 15 August 2023

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2212.14188

zbMATH Keywords

cone constraintsmonotone mean-variancerandom coefficientsrobust control

Mathematics Subject Classification ID

Applications of stochastic analysis (to PDEs, etc.) (60H30) Portfolio theory (91G10) Optimal stochastic control (93E20)

Abstract: This paper studies the monotone mean-variance (MMV) problem and the classical mean-variance (MV) with convex cone trading constraints in a market with random coefficients. We provide explicit optimal strategies and optimal values for both problems via certain backward stochastic differential equations (BSDEs). After noting the links between these BSDEs, we find that both the two problems share the same optimal portfolio and optimal value. This generalizes the result of $[$Shen Y, Zou B. Cone-constrained monotone mean-variance portfolio selection under diffusion models. SIAM J. Financial Math., 2022, 13(4): SC99-SC112$]$ from deterministic coefficients to random case.

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Cites work

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• Constrained stochastic LQ control with regime switching and application to portfolio selection
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Cited in

(5)

• Uniqueness of equilibrium strategies in dynamic mean-variance problems with random coefficients
• A note on monotone mean-variance preferences for continuous processes
• Short communication: cone-constrained monotone mean-variance portfolio selection under diffusion models
• Constrained monotone mean-variance investment-reinsurance under the Cramér-Lundberg model with random coefficients
• Optimal strategies and values for monotone and classical mean-variance preferences coincide when asset prices are continuous

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