A Stochastic Portfolio Optimization Model with Bounded Memory

A Stochastic Portfolio Optimization Model with Bounded Memory

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Article ID: iaor201111564
Volume: 36
Issue: 4
Start Page Number: 604
End Page Number: 619
Publication Date: Nov 2011
Journal: Mathematics of Operations Research
Authors: , ,
Keywords: portfolio management
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.

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