Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/98885
Title: Mean–variance portfolio selection under no-shorting rules : a BSDE approach
Authors: Zhang, L
Li, X 
Issue Date: Jul-2023
Source: Systems and control letters, July 2023, v. 177, 105545
Abstract: This paper revisits the mean–variance portfolio selection problem in continuous-time within the framework of short-selling of stocks is prohibited via backward stochastic differential equation approach. To relax the strong condition in Li et al. (Li et al. 2002), the above issue is formulated as a stochastic recursive optimal linear–quadratic control problem. Due to no-shorting rules (namely, the portfolio taking non-negative values), the well-known “completion of squares” no longer applies directly. To overcome this difficulty, we study the corresponding Hamilton–Jacobi–Bellman (HJB, for short) equation inherently and derive the two groups of Riccati equations. On one hand, the value function constructed via Riccati equations is shown to be a viscosity solution of the HJB equation mentioned before; On the other hand, by means of these Riccati equations and backward semigroup, we are able to get explicitly the efficient frontier and efficient investment strategies for the recursive utility mean–variance portfolio optimization problem.
Keywords: Mean–variance portfolio selection
Short-selling prohibition
Efficient frontier
HJB equation
Recursive utility
Viscosity solution
Publisher: Elsevier BV
Journal: Systems and control letters 
ISSN: 0167-6911
EISSN: 1872-7956
DOI: 10.1016/j.sysconle.2023.105545
Appears in Collections:Journal/Magazine Article

Open Access Information
Status embargoed access
Embargo End Date 2025-07-31
Access
View full-text via PolyU eLinks SFX Query
Show full item record

Page views

26
Citations as of Mar 24, 2024

Google ScholarTM

Check

Altmetric


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.