Dual method for continuous-time Markowitz's Problems with nonlinear wealth equations

Details Dual method for continuous-time Markowitz's Problems with nonlinear wealth equations Dual method for continuous-time Markowitz's Problems with nonlinear wealth equations

2008-06-30

arxiv.org/abs/0806.4834v1

Economy

Quantitative Finance

Portfolio Management

18 pages

Scientific paper

Continuous-time mean-variance portfolio selection model with nonlinear wealth equations and bankruptcy prohibition is investigated by the dual method. A necessary and sufficient condition which the optimal terminal wealth satisfies is obtained through a terminal perturbation technique. It is also shown that the optimal wealth and portfolio is the solution of a forward-backward stochastic differential equation with constraints.

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