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Erschienen in: Finance and Stochastics 3/2021

10.06.2021

Robust state-dependent mean–variance portfolio selection: a closed-loop approach

verfasst von: Bingyan Han, Chi Seng Pun, Hoi Ying Wong

Erschienen in: Finance and Stochastics | Ausgabe 3/2021

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Abstract

This paper studies a class of robust mean–variance portfolio selection problems with state-dependent risk aversion. Model uncertainty, in the sense of considering alternative dominated models, is introduced to the problem to reflect the investor’s uncertainty-averse preference. To characterise the robust portfolios, we consider closed-loop equilibrium control and spike variation approaches. Moreover, we show that a closed-loop equilibrium strategy exists and is unique under some technical conditions. This partially addresses open problems left in Björk et al. (Finance Stoch. 21:331–360, 2017) and Pun (Automatica 94:249–257, 2018). By using a necessary and sufficient condition for the equilibrium, we manage to derive the analytical form of the equilibrium strategy via the unique solution to a nonlinear ordinary differential equation system. To validate the proposed closed-loop control framework, we show that when there is no uncertainty, our equilibrium strategy is reduced to the strategy in Björk et al. (Math. Finance 24:1–24, 2014), which cannot be deduced under the open-loop control framework.

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Metadaten
Titel
Robust state-dependent mean–variance portfolio selection: a closed-loop approach
verfasst von
Bingyan Han
Chi Seng Pun
Hoi Ying Wong
Publikationsdatum
10.06.2021
Verlag
Springer Berlin Heidelberg
Erschienen in
Finance and Stochastics / Ausgabe 3/2021
Print ISSN: 0949-2984
Elektronische ISSN: 1432-1122
DOI
https://doi.org/10.1007/s00780-021-00457-4

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