Abstract
Techniques of filtering and parameter reestimation of a general hidden Markov model are developed and applied to a discrete time multi-period asset allocation problem, where a commonly used mean-variance utility is considered and recursive calculation of an explicit optimal portfolio is provided. Our result is a generalization of that by Robert J. Elliott and John van der Hoek.
Acknowledgments
The author would like to thank Professor Allanus Tsoi (University of Missouri – Columbia) for the helpful discussions.