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Dynamic mean-variance portfolio selection with borrowing constraint

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  • Fu, Chenpeng
  • Lari-Lavassani, Ali
  • Li, Xun

Abstract

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.

Suggested Citation

  • Fu, Chenpeng & Lari-Lavassani, Ali & Li, Xun, 2010. "Dynamic mean-variance portfolio selection with borrowing constraint," European Journal of Operational Research, Elsevier, vol. 200(1), pages 312-319, January.
    • Handle: RePEc:eee:ejores:v:200:y:2010:i:1:p:312-319
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    References listed on IDEAS

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