A continuous-time hidden Markov model for mean-variance portfolio optimization

Robert J. Elliott, Kuen Siu Tak

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

1 Citation (Scopus)

Abstract

We study a mean-variance portfolio selection problem under a hidden Markov regime-switching Black-Scholes-Merton economy with parameter uncertainty. By exploiting the separation principle, we solve the mean-variance portfolio selection problem and the filtering/estimation problem separately. An explicit solution to the mean-variance problem is derived using the stochastic maximum principle. Robust filters of the chain and robust-based EM algorithm for unknown model parameters are developed.

Original languageEnglish
Title of host publication2009 IEEE International Symposium on Circuits and Systems
Place of PublicationPiscataway, NJ
PublisherInstitute of Electrical and Electronics Engineers (IEEE)
Pages1189-1192
Number of pages4
ISBN (Electronic)9781424438280
ISBN (Print)9781424438273
DOIs
Publication statusPublished - May 2009
Externally publishedYes
Event2009 IEEE International Symposium on Circuits and Systems, ISCAS - 2009 - Taipei, Taiwan, Province of China
Duration: 24 May 200927 May 2009

Other

Other2009 IEEE International Symposium on Circuits and Systems, ISCAS - 2009
CountryTaiwan, Province of China
CityTaipei
Period24/05/0927/05/09

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  • Cite this

    Elliott, R. J., & Tak, K. S. (2009). A continuous-time hidden Markov model for mean-variance portfolio optimization. In 2009 IEEE International Symposium on Circuits and Systems (pp. 1189-1192). [5117974] Piscataway, NJ: Institute of Electrical and Electronics Engineers (IEEE). https://doi.org/10.1109/ISCAS.2009.5117974