Dynamic mean-variance portfolio selection with no-shorting constraints. (English) Zbl 1027.91040

This paper studies the mean-variance portfolio problem of choosing a self-financing strategy that minimizes the variance of final wealth for a given expected final wealth, and with the additional constraint that no short-selling is allowed in the risky assets. This problem is solved by means of stochastic linear-quadratic control methods in the context of a multidimensional Itô process model with deterministic coefficients. The authors construct a function from the solutions of two Riccati equations and show that this is a viscosity solution for the HJB equation associated to the original problem. The efficient frontier and the corresponding strategies can then be given explicitly, and an example illustrates the results.


91G10 Portfolio theory
93E20 Optimal stochastic control
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