Name
Title | ||
|---|---|---|
Optimal portfolios with maximum Value-at-Risk constraint under a hidden Markovian regime-switching model. |
Abstract | ||
|---|---|---|
This paper studies an optimal portfolio selection problem in the presence of the Maximum Value-at-Risk (MVaR) constraint in a hidden Markovian regime-switching environment. The price dynamics of n risky assets are governed by a hidden Markovian regime-switching model with a hidden Markov chain whose states represent the states of an economy. We formulate the problem as a constrained utility maximization problem over a finite time horizon and then reduce it to solving a Hamilton-Jacobi-Bellman (HJB) equation using the separation principle. The MVaR constraint for n risky assets plus one riskless asset is derived and the method of Lagrange multiplier is used to deal with the constraint. A numerical algorithm is then adopted to solve the HJB equation. Numerical results are provided to demonstrate the implementation of the algorithm. |
Year | DOI | Venue |
|---|---|---|
2016 | 10.1016/j.automatica.2016.07.032 | Automatica |
Keywords | Field | DocType |
Hamilton–Jacobi–Bellman (HJB) equation,Hidden Markov model (HMM),Multiple risky assets,Maximum Value-at-Risk (MVaR) constraint,Optimal portfolio | Hamilton–Jacobi–Bellman equation,Mathematical optimization,Markov process,Separation principle,Lagrange multiplier,Portfolio,Utility maximization problem,Hidden Markov model,Mathematics,Value at risk | Journal |
Volume | Issue | ISSN |
74 | C | 0005-1098 |
Citations | PageRank | References |
2 | 0.46 | 0 |
Authors | ||
4 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Dong-Mei Zhu | 1 | 3 | 0.80 |
| Yue Xie | 2 | 2 | 0.79 |
| Wai-Ki Ching | 3 | 683 | 78.66 |
| Tak Kuen Siu | 4 | 7 | 1.67 |