Automation and Remote Control
Automatica (Journal of IFAC)
A generalized multi-period mean-variance portfolio optimization with Markov switching parameters
Automatica (Journal of IFAC)
Numerical methods for portfolio selection with bounded constraints
Journal of Computational and Applied Mathematics
Randomly switching systems: models, analysis, and applications
CCDC'09 Proceedings of the 21st annual international conference on Chinese Control and Decision Conference
Optimal portfolios with regime switching and value-at-risk constraint
Automatica (Journal of IFAC)
Journal of Computational and Applied Mathematics
Portfolio Selection in the Enlarged Markovian Regime-Switching Market
SIAM Journal on Control and Optimization
A trend-following strategy: Conditions for optimality
Automatica (Journal of IFAC)
Computers & Mathematics with Applications
Optimal control of the risk process in a regime-switching environment
Automatica (Journal of IFAC)
On Optimal Harvesting Problems in Random Environments
SIAM Journal on Control and Optimization
Automatica (Journal of IFAC)
Near-optimal controls of random-switching LQ problems with indefinite control weight costs
Automatica (Journal of IFAC)
Asset allocation under threshold autoregressive models
Applied Stochastic Models in Business and Industry
SIAM Journal on Control and Optimization
Automatica (Journal of IFAC)
Hi-index | 0.02 |
A continuous-time version of the Markowitz mean-variance portfolio selection model is proposed and analyzed for a market consisting of one bank account and multiple stocks. The market parameters, including the bank interest rate and the appreciation and volatility rates of the stocks, depend on the market mode that switches among a finite number of states. The random regime switching is assumed to be independent of the underlying Brownian motion. This essentially renders the underlying market incomplete. A Markov chain modulated diffusion formulation is employed to model the problem. Using techniques of stochastic linear-quadratic control, mean-variance efficient portfolios and efficient frontiers are derived explicitly in closed forms, based on solutions of two systems of linear ordinary differential equations. Related issues such as a minimum-variance portfolio and a mutual fund theorem are also addressed. All the results are markedly different from those for the case when there is no regime switching. An interesting observation is, however, that if the interest rate is deterministic, then the results exhibit (rather unexpected) similarity to their no-regime-switching counterparts, even if the stock appreciation and volatility rates are Markov-modulated.