Quadratic Risk Minimization in a Regime-Switching Model with Portfolio Constraints

• Published in: SIAM journal on control and optimization Vol. 50; no. 4; pp. 2431 - 2461
• Main Authors: Donnelly, Catherine, Heunis, Andrew J.
• Format: Journal Article
• Language: English
• Published: Philadelphia Society for Industrial and Applied Mathematics 01.01.2012
• Subjects: Applied mathematics; Bear markets; Brownian motion; Conjugates; Engineering research; Expected values; Hedging; Macroeconomics; Markets; Markov analysis; Markov chains; Mathematical analysis; Mathematical models; Optimization; Prices; Raw materials

We study a problem of stochastic control in mathematical finance, for which the asset prices are modeled by Ito processes. The market parameters exhibit "regime-switching" in the sense of being adapted to the joint filtration of the Brownian motion in the asset price models and a given fin...