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A varying terminal time mean-variance model

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  • Shuzhen Yang

Abstract

To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying terminal time. Using the embedding technique from stochastic optimal control in continuous time and varying the terminal time, we determine an optimal strategy and related deterministic terminal time for the model. Our results suggest that doing so for an investment plan requires minimizing the variance with a varying terminal time.

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  • Shuzhen Yang, 2019. "A varying terminal time mean-variance model," Papers 1909.13102, arXiv.org, revised Jan 2020.
    • Handle: RePEc:arx:papers:1909.13102
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    1. Andrew E. B. Lim, 2004. "Quadratic Hedging and Mean-Variance Portfolio Selection with Random Parameters in an Incomplete Market," Mathematics of Operations Research, INFORMS, vol. 29(1), pages 132-161, February.
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