Mean-variance portfolio optimization when each asset has individual uncertain exit-time

Abstract

The standard Markowitz Mean-Variance optimization model is a single-period portfolio selection approach where the exit-time (or the time-horizon) is deterministic. In this paper the Mean-Variance portfolio selection problem has been studied with uncertain exit-time when each asset has individual uncertain exit-time, which generalizes the Markowitz's model. Some conditions are provided under which the optimal portfolio of the generalized problem is independent of the exit-times distributions. Also, it is shown that under some general circumstances, the sets of optimal portfolios in the generalized model and the standard model are the same.