Dynamic mean-variance model with borrowing constraint under the constant elasticity of variance process

DOI10.1155/2013/348059MaRDI QIDQ1789866zbMATH OpenOpenAlexWikidataFDO

Authors Hao Chang, Ximin Rong

Publication date 10 October 2018

Published in Journal of Applied Mathematics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2013/348059

Mathematics Subject Classification ID

Dynamic programming in optimal control and differential games (49L20) Portfolio theory (91G10) Financial applications of other theories (91G80)

Review text

Summary: This paper studies a continuous-time dynamic mean-variance portfolio selection problem with the constraint of a higher borrowing rate, in which stock price is governed by a constant elasticity of variance (CEV) process. Firstly, we apply Lagrange duality theorem to change an original mean-variance problem into an equivalent optimization one. Secondly, we use dynamic programming principle to get the Hamilton-Jacobi-Bellman (HJB) equation for the value function, which is a more sophisticated nonlinear second-order partial differential equation. Furthermore, we use Legendre transform and dual theory to transform the HJB equation into its dual one. Finally, the closed-form solutions to the optimal investment strategy and efficient frontier are derived by applying variable change technique.

Recommendations

• Continuous-time mean-variance portfolio selection under the CEV process
• Mean-variance portfolio selection under a constant elasticity of variance model
• Portfolio selection problem with multiple risky assets under the constant elasticity of variance model
• Dynamic mean-variance portfolio selection with borrowing constraint
• On the constant elasticity of variance model for the utility maximization problem with multiple risky assets

Cited in

(7)

• Continuous-time mean-variance portfolio selection under the CEV process
• Optimal portfolio management in a modified constant elasticity of variance model
• Mean-variance portfolio selection under a constant elasticity of variance model
• Dynamic mean-variance portfolio selection with borrowing constraint
• Mean-variance asset-liability management under constant elasticity of variance process
• Optimal investment and consumption decisions under the constant elasticity of variance model
• On the constant elasticity of variance model for the utility maximization problem with multiple risky assets

This page was built for publication: Dynamic mean-variance model with borrowing constraint under the constant elasticity of variance process

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1789866)