Time-consistency in the mean-variance problem: A new perspective
Optimization and Control
2025-09-23 v1
Abstract
We investigate discrete-time mean-variance portfolio selection problems viewed as a Markov decision process. We transform the problems into a new model with deterministic transition function for which the Bellman optimality equation holds. In this way, we can solve the problem recursively and obtain a time-consistent solution, that is an optimal solution that meets the Bellman optimality principle. We apply our technique for solving explicitly a more general framework.
Cite
@article{arxiv.2301.11218,
title = {Time-consistency in the mean-variance problem: A new perspective},
author = {Nicole Bäuerle and Anna Jaśkiewicz},
journal= {arXiv preprint arXiv:2301.11218},
year = {2025}
}