Dynamic mean-variance portfolio selection with borrowing constraint. (English) Zbl 1183.91192

Summary: This paper derives explicit closed form solutions, for the efficient frontier and optimal investment strategy, for the dynamic mean-variance portfolio selection problem under the constraint of a higher borrowing rate. The method used is the Hamilton-Jacobi-Bellman (HJB) equation in a stochastic piecewise linear-quadratic (PLQ) control framework. The results are illustrated on an example.


91G80 Financial applications of other theories
91G10 Portfolio theory
93E20 Optimal stochastic control
Full Text: DOI


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