TITLE

Robust Optimal Portfolio Choice Under Markovian Regime-switching Model

AUTHOR(S)
Elliott, Robert J.; Tak Kuen Siu
PUB. DATE
June 2009
SOURCE
Methodology & Computing in Applied Probability;Jun2009, Vol. 11 Issue 2, p145
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
We investigate an optimal portfolio selection problem in a continuous-time Markov-modulated financial market when an economic agent faces model uncertainty and seeks a robust optimal portfolio strategy. The key market parameters are assumed to be modulated by a continuous-time, finite-state Markov chain whose states are interpreted as different states of an economy. The goal of the agent is to maximize the minimal expected utility of terminal wealth over a family of probability measures in a finite time horizon. The problem is then formulated as a Markovian regime-switching version of a two-player, zero-sum stochastic differential game between the agent and the market. We solve the problem by the Hamilton-Jacobi-Bellman approach.
ACCESSION #
36966676

 

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