A Unified Approach to Dynamic Mean-Variance Analysis in Discrete and Continuous Time
Author | : Paul A. Bekker |
Publisher | : |
Total Pages | : 27 |
Release | : 2009 |
ISBN-10 | : OCLC:1290253988 |
ISBN-13 | : |
Rating | : 4/5 (88 Downloads) |
Book excerpt: Motivated by yield curve modeling, we solve dynamic mean-variance efficiency problems in both discrete and continuous time. Our solution applies to both complete and incomplete markets and we do not require the existence of a riskless asset, which is relevant for yield curve modeling. Stochastic market parameters are incorporated using a vector of state variables. In particular for markets with deterministic parameters, we provide explicit solutions. In such markets, where no riskless asset need be present, we describe term-independent uniformly mean-variance efficient investment strategies. For constant parameters we show the existence of a unique, symmetrically distributed, trend stationary, uniformly MV efficient strategy.