Cone-constrained Monotone Mean-Variance Portfolio Selection Under Diffusion Models
Portfolio Management
2022-06-01 v1 Optimization and Control
Mathematical Finance
Abstract
We consider monotone mean-variance (MMV) portfolio selection problems with a conic convex constraint under diffusion models, and their counterpart problems under mean-variance (MV) preferences. We obtain the precommitted optimal strategies to both problems in closed form and find that they coincide, without and with the presence of the conic constraint. This result generalizes the equivalence between MMV and MV preferences from non-constrained cases to a specific constrained case. A comparison analysis reveals that the orthogonality property under the conic convex set is a key to ensuring the equivalence result.
Cite
@article{arxiv.2205.15905,
title = {Cone-constrained Monotone Mean-Variance Portfolio Selection Under Diffusion Models},
author = {Yang Shen and Bin Zou},
journal= {arXiv preprint arXiv:2205.15905},
year = {2022}
}