Abstract:This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a performance criterion based on the lower mean square error between the investor's wealth and a predetermined target wealth level. Since the target level is defined by a deterministic function independent of market indices, it corresponds to the criterion of absolute return funds.… Show more
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