Mean–variance portfolio selection under partial information with drift uncertainty

Jie Xiong, Zuo Quan Xu, Jiayu Zheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

In this paper, we study the mean–variance portfolio selection problem under partial information with drift uncertainty. First we show that the market model is complete even in this case while the information is not complete and the drift is uncertain. Then, the optimal strategy based on partial information is derived, which reduces to solving a related backward stochastic differential equation (BSDE). Finally, we propose an efficient numerical scheme to approximate the optimal portfolio that is the solution of the BSDE mentioned above. Malliavin calculus and the particle representation play important roles in this scheme.

Original languageEnglish
Pages (from-to)1-13
Number of pages13
JournalQuantitative Finance
DOIs
Publication statusE-pub ahead of print - 8 Apr 2021

Keywords

  • Drift uncertainty
  • Malliavin calculus
  • Mean–variance portfolio selection
  • Partial information

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)

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