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arXiv · 2301.11218

Time-consistency in the mean-variance problem: A new perspective

Nicole Bäuerle·Anna Jaśkiewicz
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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.

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Nicole Bäuerle, Anna Jaśkiewicz. 2023-01-26. Time-consistency in the mean-variance problem: A new perspective. https://doi.org/10.1109/tac.2024.3420413

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