Boundedness of the Value Function of the Worst-Case Portfolio Selection Problem with Linear Constraints

22 Pages Posted: 25 Jan 2017

See all articles by Nikolay Andreev

Nikolay Andreev

National Research University Higher School of Economics

Date Written: January 25, 2017

Abstract

We study the boundedness properties of the value function for a general worst-case scenario stochastic dynamic programming problem. For the portfolio selection problem,we present sufficient economically reasonable conditions for the finitness and uniform boundedness of the value function. The results can be used to decide if the problem is ill-posed and to correctly solve the Bellman-Isaacs equation with an appropriate numeric scheme.

Keywords: portfolio selection, Bellman-Isaacs equation, stochastic dynamic programming, value function, worst-case optimization

JEL Classification: C61, C63, G11

Suggested Citation

Andreev, Nikolay, Boundedness of the Value Function of the Worst-Case Portfolio Selection Problem with Linear Constraints (January 25, 2017). Higher School of Economics Research Paper No. WP BRP 59/FE/2017. Available at SSRN: https://ssrn.com/abstract=2905622 or http://dx.doi.org/10.2139/ssrn.2905622

Nikolay Andreev (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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