The impact of short-sale constraints on asset allocation strategies via the backward Markov chain approximation method
This paper deals with asset allocation strategies, under stochastic interest rate and inflation risks. In particular, the authors investigate the effect of short sale constraints on asset allocation strategies. Under no short sale constraints, they provide an optimal strategy analytically through the Hamilton-Jacobi-Bellman equation. They consider several kinds of short sale constraints and explore the impact of these constraints on asset allocation strategies, applying the backward Markov chain approximation method with iteration scheme. Various kinds of numerical examples, showing significant effects on strategies, are presented.
scientific article; zbMATH DE number 5080823