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Zbl 0997.91027
Li, Duan; Ng, Wan-Lung
Optimal dynamic portfolio selection: Multiperiod mean-variance formulation. (English)
[J] Math. Finance 10, No.3, 387-406 (2000). ISSN 0960-1627; ISSN 1467-9965/e

This paper studies quadratic portfolio selection problems in a model with finite discrete time and for assets with independent returns whose mean vectors and covariance matrices are known. It gives explicit feedback formulae (in terms of current wealth) for the optimal strategies under several mean-variance related criteria. This is possible because due to the independence assumption, the associated linear-quadratic control problem can be solved explicitly. The paper also gives necessary optimality conditions for maximizing utility from the mean and variance of final wealth, and concludes with a few numerical examples. For related work with a focus more on stochastic optimisation, see also {\it M. C. Steinbach} [SIAM Rev. 43, No. 1, 31-85 (2001; Zbl 1049.91086)].
[Martin Schweizer (München)]

MSC 2000:: *91B28 Finance etc.
49N10 Linear-quadratic optimal control problems
93E24 Least squares and related methods in stochastic control
90C39 Dynamic programming

Keywords: multiperiod portfolio selection; mean-variance criteria; linear-quadratic control

Citations: Zbl 1049.91086

Cited in: Zbl 1198.91185 Zbl 1182.91161 Zbl 1205.91156 Zbl 1160.90544 Zbl 1150.60034 Zbl 1179.91234

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