TITLE:
Multi-Period Portfolio Selection with No-Shorting Constraints: Duality Analysis
AUTHORS:
Jun Qi, Lan Yi
KEYWORDS:
Multi-Period Mean-Variance Formulation, Auxiliary Market, Martingale Method, Risk Neutral Probability, Duality, Optimal Trading Strategy
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.7 No.3,
August
31,
2017
ABSTRACT: This paper considers a multi-period mean-variance portfolio selection problem with no shorting constraint. We assume that the sample space is finite, and the possible securities price vector transitions is equivalent to the number of securities. By making use of the embedding technique of Li and Ng (2000), the original nonseparable problem can be solved by introducing an auxiliary problem. After the risk neutral probability is calculated, the auxiliary problem can be solved by using the martingale method of Pliska (1986). Finally, we derive a closed form of the optimal solution to the original constrained problem.