A mean–variance portfolio selection problem subject to a benchmark constraint: An existence result

Issue title: Financial Derivatives and Risk Models

Article type: Research Article

Authors: Yam, S.C.P. | Yung, S.P.^; | Zhou, J.H.

Affiliations: Department of Statistics, Chinese University of Hong Kong, Hong Kong | Department of Mathematics, University of Hong Kong, Hong Kong

Note: [] Address for correspondence: S.P. Yung, Department of Mathematics, University of Hong Kong, Hong Kong. E-mail: [email protected]

Abstract: In this paper, we study a mean–variance portfolio selection problem that has a probabilistic benchmark constraint. This constraint changes the problem into a non-convex one but could be solved via the method of Lagrange multipliers, whose existence is crucial in the solution.

Keywords: Lagrange multiplier, optimization, mean–variance portfolio selection

DOI: 10.3233/RDA-2012-0075

Journal: Risk and Decision Analysis, vol. 4, no. 1, pp. 25-38, 2013