Mean-variance portfolio selection under Volterra Heston model
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Publication:2045133
DOI10.1007/S00245-020-09658-3zbMATH Open1470.91242arXiv1904.12442OpenAlexW3098958388WikidataQ126290749 ScholiaQ126290749MaRDI QIDQ2045133FDOQ2045133
Authors: Bingyan Han, Hoi Ying Wong 
Publication date: 11 August 2021
Published in: Applied Mathematics and Optimization (Search for Journal in Brave)
Abstract: Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean-variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-semimartingale nature of the model, classic stochastic optimal control frameworks are not directly applicable to the associated optimization problem. By constructing an auxiliary stochastic process, we obtain the optimal investment strategy, which depends on the solution to a Riccati-Volterra equation. The MV efficient frontier is shown to maintain a quadratic curve. Numerical studies show that both roughness and volatility of volatility materially affect the optimal strategy.
Full work available at URL: https://arxiv.org/abs/1904.12442
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- Portfolio insurance under rough volatility and Volterra processes
- American options in the Volterra Heston model
- Partial hedging in rough volatility models
- Mean-variance portfolio with wealth and volatility dependent risk aversion
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- Markowitz portfolio selection for multivariate affine and quadratic Volterra models
- Mean-variance portfolio selection based on a generalized BNS stochastic volatility model
- Mean-variance asset-liability management under CIR interest rate and the family of 4/2 stochastic volatility models with derivative trading
- Volterra square-root process: stationarity and regularity of the law
- Signature-based validation of real-world economic scenarios
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