Journal
JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS
Volume 158, Issue 3, Pages 918-934Publisher
SPRINGER/PLENUM PUBLISHERS
DOI: 10.1007/s10957-013-0292-x
Keywords
Mean-variance portfolio selection; Markov regime switching; Stochastic cash flow; Geometric Levy process; LQ technique
Funding
- Humanity and Social Science Foundation of Ministry of Education of China [12YJCZH219]
- National Natural Science Foundation of China [71271223]
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This paper considers a non-self-financing mean-variance portfolio selection problem in which the stock price and the stochastic cash flow follow a Markov-modulated L,vy process and a Markov-modulated Brownian motion with drift, respectively. The stochastic cash flow can be explained as the stochastic income or liability of the investors during the investment process. The existence of optimal solutions is analyzed, and the optimal strategy and the efficient frontier are derived in closed-form by the Lagrange multiplier technique and the LQ (Linear Quadratic) technique.
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