Dynamic mean-variance portfolio selection with borrowing constraint

Chenpeng Fu; Ali Lari-Lavassani; Xun Li

doi:10.1016/j.ejor.2009.01.005

Dynamic mean-variance portfolio selection with borrowing constraint

Chenpeng Fu, Ali Lari-Lavassani, Xun Li

Research output: Journal article publication › Journal article › Academic research › peer-review

89 Citations (Scopus)

Abstract

This paper derives explicit closed form solutions, for the efficient frontier and optimal investment strategy, for the dynamic mean-variance portfolio selection problem under the constraint of a higher borrowing rate. The method used is the Hamilton-Jacobi-Bellman (HJB) equation in a stochastic piecewise linear-quadratic (PLQ) control framework. The results are illustrated on an example. Crown

Original language	English
Pages (from-to)	312-319
Number of pages	8
Journal	European Journal of Operational Research
Volume	200
Issue number	1
DOIs	https://doi.org/10.1016/j.ejor.2009.01.005
Publication status	Published - 1 Jan 2010

Keywords

Borrowing rate
Continuous-time finance
Efficient frontier
HJB equation
Mean-variance portfolio selection
Optimal portfolio
Stochastic PLQ control

ASJC Scopus subject areas

Modelling and Simulation
Management Science and Operations Research
Information Systems and Management

More information

10.1016/j.ejor.2009.01.005

Cite this

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KW - Borrowing rate

KW - Continuous-time finance

KW - Efficient frontier

KW - HJB equation

KW - Mean-variance portfolio selection

KW - Optimal portfolio

KW - Stochastic PLQ control

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Dynamic mean-variance portfolio selection with borrowing constraint

Abstract

Keywords

ASJC Scopus subject areas

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