Abstract
This paper studies a continuous-time securities market where an agent, having a random investment horizon and a targeted terminal mean return, seeks to minimize the variance of a portfolio's return. Two situations are discussed, namely a deterministic time-varying density process and a stochastic density process. In contrast to [18], the variance of an investment portfolio is no longer minimal when all assets are invested in a risk-free security. Furthermore, the random investment horizon has a material effect on the efficient frontier. This provides some insights into the classical mutual fund theorem.
| Original language | English |
|---|---|
| Pages (from-to) | 4726-4739 |
| Number of pages | 14 |
| Journal | Journal of Industrial and Management Optimization |
| Volume | 19 |
| Issue number | 7 |
| DOIs | |
| Publication status | Published - Jul 2023 |
Keywords
- efficient frontier
- HJB equations
- Mean variance
- random time horizon
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management
- Control and Optimization
- Applied Mathematics