Multi-period mean-variance portfolio optimization with markov switching parameters

By Oswaldo Luiz do Valle Costa, Michael Viriato Araujo. 2008

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In this paper we deal with a multi-period mean-variance portfolio selection problem with the market parameters subject to Markov random regime switching. We analytically derive an optimal control policy for this mean-variance formulation in a closed form. Such a policy is obtained from a set of interconnected Riccati difference equations. Additionally, an explicit expression for the efficient frontier corresponding to this control law is identified and numerical examples are presented.

Subfields: Demography, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/02a6bd0d7b8d149b7f4307f34edc14bf9c043bfa