A Stochastic Portfolio Optimization Model with Bounded Memory

Date

2011

Authors

Yipeng, Yang

Journal Title

Journal ISSN

Volume Title

Publisher

Mathematics of Operations Research

Abstract

This paper considers a portfolio management problem of Merton's type in which the risky asset return is related to the return history. The problem is modeled by a stochastic system with delay. The investor's goal is to choose the investment control as well as the consumption control to maximize his total expected, discounted utility. Under certain situations, we derive the explicit solutions in a finite dimensional space.

Description

Keywords

Portfolio optimization, Hamilton–Jacobi–Bellman equation, dynamic programming, stochastic delay equation

Citation

Mou-Hsiung Chang, Tao Pang and Yipeng Yang, A Stochastic Portfolio Optimization Model with Bounded Memory, Mathematics of Operations Research, 36 i4(11) 604-619, 2011