Control in Social and Economic Systems

Stochastic optimality in the portfolio tracking problem involving investor’s temporal preferences

E. S. Palamarchuk

Central Economics and Mathematics Institute of RAS

Abstract: We consider an optimal portfolio selection problem to track a riskless reference portfolio. Portfolio management strategies are compared taking into account the investor’s temporal preferences. We investigate stochastic optimality of the strategy that minimizes the expected long-run cost, deriving an asymptotical upper (almost sure) estimate for the difference between the values of the objective functional corresponding to the optimal strategy and for any admissible control.

Keywords: portfolio, stochastic control, reference path, discounting, infinite-time horizon.

UDC: 517.977.5 + 519.856
BBK: 32.81

 English version: Automation and Remote Control, 2017, 78:8, 1523–1536

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