Mean Variance Criteria Sample Clauses

Mean Variance Criteria. The purpose of an investor is to choose a proper investment strategy in order to maximise the utility function under the mean-variance criteria. That is, the aim of an investor is to find ut such that the following objective functional of the mean- variance utility is of a maximum: t t t,Xt,ψt J(t, X , ψ ; u) := E [Xu] — γ V ar [Xx], (3.36) T 2 t,Xt,ψt T t t T N t t T N where γ is a risk averse parameter; Et,Xt,ψt [·] and V art,Xt,ψt [·] denote the mean and variance of the terminal wealth XT conditioned on the current wealth Xt and current liabilities ψt, i.e. Et,X ,ψ [Xu] = E[Xu |Xt, ψt], V art,X ,ψ [Xu] = V ar[Xu |Xt, ψt].
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