1. A stochastic portfolio optimization model with bounded memory
- Author
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Chang, Mou-Hsiung, Pang, Tao, and Yang, Yipeng
- Subjects
Investment analysis -- Models ,Soil management -- Models ,Business ,Computers and office automation industries ,Mathematics - Abstract
This paper considers a portfolio management problem of Merton's type in which the risky asset return is related to the return history. The problem is modeled by a stochastic system with delay. The investor's goal is to choose the investment control as well as the consumption control to maximize his total expected, discounted utility. Under certain situations, we derive the explicit solutions in a finite dimensional space. Key words: stochastic delay equations; optimal stochastic control; Hamilton-Jacobi-Bellman equation MSC2000 subject classification: Primary: 34K50, 91B28; secondary: 93E20, 49L20 OR/MS subject classification: Primary: dynamic programming/optimal control-applications; secondary: finance-portfolio, investment History: Received April 1, 2010; revised February I. 2011. Published online in Articles in Advance October 14, 2011., 1. Introduction. In this paper, we consider a stochastic portfolio management problem in which the history (delay) of the portfolio performance is taken into consideration. In the classical Merton's model, [...]
- Published
- 2011
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