Dynamic optimal mean-variance portfolio selection with a 3/2 stochastic volatility

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Dokumenter

  • Yumo Zhang

This paper considers a mean-variance portfolio selection problem when the stock price has a 3/2 stochastic volatility in a complete market. Specifically, we assume that the stock price and the volatility are perfectly negative correlated. By applying a backward stochastic differential equation (BSDE) approach, closed-form expressions for the statically optimal (time-inconsistent) strategy and the value function are derived. Due to time-inconsistency of mean variance criterion, a dynamic formulation of the problem is presented. We obtain the dynamically optimal (time-consistent) strategy explicitly, which is shown to keep the wealth process strictly below the target (expected terminal wealth) before the terminal time. Finally, we provide numerical studies to show the impact of main model parameters on the efficient frontier and illustrate the differences between the two optimal wealth processes.

OriginalsprogEngelsk
Artikelnummer61
TidsskriftRisks
Vol/bind9
Udgave nummer4
Antal sider21
ISSN2227-9091
DOI
StatusUdgivet - 2021

Antal downloads er baseret på statistik fra Google Scholar og www.ku.dk


Ingen data tilgængelig

ID: 261383048