Abstract
We study a portfolio selection problem in a continuous-time Markovian regime-switching model. The market in this model is, in general, incomplete. Wo adopt a method to complete the market based on an enlargement of the market using a sot of geometric Markovian jump securities. We solve the portfolio selection problem in the enlarged market for a power utility and a logarithmic utility. Closed-form solutions for the optimal portfolio strategics and the value functions arc obtained in both cases. Wo also establish the relationship between the optimal portfolio problems in the enlarged market and the original market.
| Original language | English |
|---|---|
| Pages (from-to) | 3368-3388 |
| Number of pages | 21 |
| Journal | SIAM Journal on Control and Optimization |
| Volume | 48 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 2010 |
Bibliographical note
Copyright SIAM Publications. Article archived for private and non-commercial use with the permission of the author and according to publisher conditions. For further information see http://www.siam.org/Keywords
- Dynamic programming
- Enlargement of market
- Geometric markovian jump securities
- Hamilton-Jacobi-Bollman equations
- Markovian regime-switching market
- Portfolio optimization