Volume 53, Number 4, October 2019
|Page(s)||1171 - 1186|
|Published online||29 July 2019|
Mean-variance portfolio selection with an uncertain exit-time in a regime-switching market
Department of Mathematics, University of Khansar, Khansar, Iran
* Corresponding author: email@example.com
Accepted: 19 June 2018
In this paper, we deal with multi-period mean-variance portfolio selection problems with an exogenous uncertain exit-time in a regime-switching market. The market is modelled by a non-homogeneous Markov chain in which the random returns of assets depend on the states of the market and investment time periods. Applying the Lagrange duality method, we derive explicit closed-form expressions for the optimal investment strategies and the efficient frontier. Also, we show that some known results in the literature can be obtained as special cases of our results. A numerical example is provided to illustrate the results.
Mathematics Subject Classification: 90C39 / 91G10
Key words: Multi-period mean-variance portfolio selection / regime-switching / uncertain exit-time / Lagrange duality theorem / dynamic programming
© EDP Sciences, ROADEF, SMAI 2019
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