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Article: Portfolio optimization for jump-diffusion risky assets with regime switching: A time-consistent approach
Title | Portfolio optimization for jump-diffusion risky assets with regime switching: A time-consistent approach |
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Authors | |
Keywords | Mean-variance Portfolio selection Markov regime-switching Jump-diffusion Common shock |
Issue Date | 2020 |
Publisher | American Institute of Mathematical Sciences. The Journal's web site is located at https://www.aimsciences.org/journal/1547-5816 |
Citation | Journal of Industrial and Management Optimization, 2020, Epub 2020-11-05 How to Cite? |
Abstract | In this paper, an optimal portfolio selection problem with mean-variance utility is considered for a financial market consisting of one risk-free asset and two risky assets, whose price processes are modulated by jump-diffusion model, the two jump number processes are correlated through a common shock, and the Brownian motions are supposed to be dependent. Moreover, it is assumed that not only the risk aversion coefficient but also the market parameters such as the appreciation and volatility rates as well as the jump amplitude depend on a Markov chain with finite states. In addition, short selling is supposed to be prohibited. Using the technique of stochastic control theory and the corresponding extended Hamilton-Jacobi-Bellman equation, the explicit expressions of the optimal strategies and value function are obtained within a game theoretic framework, and the existence and uniqueness of the solutions are proved as well. In the end, some numerical examples are presented to show the impact of the parameters on the optimal strategies, and some further discussions on the case of n≥3 risky assets are given to demonstrate the important effect of the correlation coefficient of the Brownian motions on the optimal results. |
Persistent Identifier | http://hdl.handle.net/10722/287724 |
ISSN | 2023 Impact Factor: 1.2 2023 SCImago Journal Rankings: 0.364 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Zhang, C | - |
dc.contributor.author | Liang, Z | - |
dc.contributor.author | Yuen, KC | - |
dc.date.accessioned | 2020-10-05T12:02:20Z | - |
dc.date.available | 2020-10-05T12:02:20Z | - |
dc.date.issued | 2020 | - |
dc.identifier.citation | Journal of Industrial and Management Optimization, 2020, Epub 2020-11-05 | - |
dc.identifier.issn | 1547-5816 | - |
dc.identifier.uri | http://hdl.handle.net/10722/287724 | - |
dc.description.abstract | In this paper, an optimal portfolio selection problem with mean-variance utility is considered for a financial market consisting of one risk-free asset and two risky assets, whose price processes are modulated by jump-diffusion model, the two jump number processes are correlated through a common shock, and the Brownian motions are supposed to be dependent. Moreover, it is assumed that not only the risk aversion coefficient but also the market parameters such as the appreciation and volatility rates as well as the jump amplitude depend on a Markov chain with finite states. In addition, short selling is supposed to be prohibited. Using the technique of stochastic control theory and the corresponding extended Hamilton-Jacobi-Bellman equation, the explicit expressions of the optimal strategies and value function are obtained within a game theoretic framework, and the existence and uniqueness of the solutions are proved as well. In the end, some numerical examples are presented to show the impact of the parameters on the optimal strategies, and some further discussions on the case of n≥3 risky assets are given to demonstrate the important effect of the correlation coefficient of the Brownian motions on the optimal results. | - |
dc.language | eng | - |
dc.publisher | American Institute of Mathematical Sciences. The Journal's web site is located at https://www.aimsciences.org/journal/1547-5816 | - |
dc.relation.ispartof | Journal of Industrial and Management Optimization | - |
dc.rights | Journal of Industrial and Management Optimization. Copyright © American Institute of Mathematical Sciences. | - |
dc.rights | This is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here]. | - |
dc.subject | Mean-variance | - |
dc.subject | Portfolio selection | - |
dc.subject | Markov regime-switching | - |
dc.subject | Jump-diffusion | - |
dc.subject | Common shock | - |
dc.title | Portfolio optimization for jump-diffusion risky assets with regime switching: A time-consistent approach | - |
dc.type | Article | - |
dc.identifier.email | Yuen, KC: kcyuen@hku.hk | - |
dc.identifier.authority | Yuen, KC=rp00836 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.3934/jimo.2020156 | - |
dc.identifier.scopus | eid_2-s2.0-85114626470 | - |
dc.identifier.hkuros | 315621 | - |
dc.identifier.volume | Epub 2020-11-05 | - |
dc.identifier.isi | WOS:000702896600001 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 1547-5816 | - |