A numerical method for portfolio selection based on Markov chain approximation

In this paper, A portfolio selection problem is approximated by a Markov chain which ismodulated by a continuous-time, finite-state, Markov chain. The main ingredient of theMarkov chain approximation is to approximate the wealth process and utility function oforiginal utility optimization problem by a controlled Markov chain. under the convergenceof the approximation scheme, Policy iteration methods as to obtain the optimal controls. Anumerical example is provided to illustrate the reability of the algorithm.

کلیدواژه ها:

Numerical method ، Portfolio selection ، Stochastic optimal control ، Markov chain approximation