This paper concerns the continuous-time, mean-variance portfolio selection problem in a complete market with random interest rate, appreciation rates, and volatility coefficients. The problem is tackled using the results of stochastic linear-quadratic (LQ) optimal control and backward stochastic differential equations (BSDEs), two theories that have been extensively studied and developed in rec...

Abstract In this paper, we propose an approach to explore reinsurance optimization for a non-life multi-line insurer through simulation model that combines alternative treaties. Based on the Solvency II framework, maximises both solvency ratio and portfolio performance under user-defined constraints. Data visualisation helps understanding numerical results and, together with concept of Pareto f...

In this article, we provide a new methodology for optimizing a portfolio of wind farms within a market environment, for two Market Designs (exogenous prices and endogenous prices). Our model is built on an agent based representation of suppliers and generators interacting in a certain number of geographic demand markets, organized as two tiered systems. Assuming rational expectation of the agen...

This paper considers a continuous-time mean-variance portfolio selection with regime-switching and random horizon. Unlike previous works, the dynamic of assets are described by non-Markovian models in sense that all market parameters predictable respect to filtration generated jointly Markov chain Brownian motion. The is assumed be independent motion, thus incomplete. authors formulate this pro...

This paper examines a mean-variance portfolio selection problem with stochastic salary and inflation protection strategy in the accumulation phase of a defined contribution (DC) pension plan. The utility function is assumed to be quadratic. It was assumed that the flow of contributions made by the pension plan members (PPMs) are invested into a market that is characterized by a cash account, an...

We investigate the role of real estate in a mixed-asset portfolio when the maximum drawdown (hereafter MaxDD), rather than the standard deviation, is used as the measure of risk. In particular, we analyse whether the discrepancy between the optimal allocation to real estate and the actual allocation by institutional investors is less when a Return/MaxDD framework is used. The empirical analysis...

Abstract The optimum portfolio selection for an investor with particular preferences was proven to lie on the normalized efficient frontier between two bounds defined by the Ballestero (1998) bounding theorem. A deeper understanding is possible if the decision-maker is provided with visual and quantitative techniques. Here, we derive useful insights as a way to support investor?s decision-makin...

Markowitz’s celebrated mean–variance portfolio optimization theory assumes that the means and covariances of the underlying asset returns are known. In practice, they are unknown and have to be estimated from historical data. Plugging the estimates into the efficient frontier that assumes known parameters has led to portfolios that may perform poorly and have counterintuitive asset allocation w...