The Mathematical Institute, University of Oxford, Eprints Archive

The 80% Rule in Mean-Variance Portfolio Selection with Random Interest Rate

Mu, Zongyan (2014) The 80% Rule in Mean-Variance Portfolio Selection with Random Interest Rate. Masters thesis, Oxford University.

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In this thesis, we study the continuous-time mean-variance portfolio selection problem, which aims at minimising the variance of the return of a portfolio at the end of a certain investment horizon with a targeted expected return at the terminal date specified. It has been shown in the literature that, when the market parameters in the problem are all deterministic functions in time, the wealth process of the optimal portfolio can reach the discounted targeted return before or at the terminal time with a probability of at least 80%. This thesis extends the above result to some more general cases by showing that the 80% rule is still valid when the interest rate becomes random while all the other parameters are kept deterministic. This is achieved through application of backward stochastic differential equations (BSDEs) and by using some results in fixed income markets modelling.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:1848
Deposited By: Laura Auger
Deposited On:07 Aug 2014 06:49
Last Modified:29 May 2015 19:32

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