Mean-Variance Portfolio Selection in Contagious Markets

We consider a mean-variance portfolio selection problem in financial market with contagion risk. The risky assets follow jump-diffusion model, which jumps are driven by multivariate Hawkes process mutual-excitation effect. feature of the captures risk sense that each price jump an asset increases likelihood future not only same but also other assets. apply stochastic maximum principle, backward differential equation theory, and linear-quadratic control technique to solve obtain efficient strategy frontier semiclosed form, subject nonlocal partial equation. Numerical examples provided illustrate our results.