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arxiv: 0806.4834 · v1 · submitted 2008-06-30 · 💱 q-fin.PM · math.PR

Dual method for continuous-time Markowitz's Problems with nonlinear wealth equations

classification 💱 q-fin.PM math.PR
keywords wealthcontinuous-timedualequationsmethodnonlinearoptimalportfolio
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Continuous-time mean-variance portfolio selection model with nonlinear wealth equations and bankruptcy prohibition is investigated by the dual method. A necessary and sufficient condition which the optimal terminal wealth satisfies is obtained through a terminal perturbation technique. It is also shown that the optimal wealth and portfolio is the solution of a forward-backward stochastic differential equation with constraints.

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