ABSTRACT
This chapter discusses multiperiod optimal portfolios in the discrete time. In this case, a sequence of optimal portfolio weights is obtained as the solutions of the first-order conditions. The chapter considers continuous time problems, which means that an investor is able to re-balance his/her portfolio continuously during the investment period. It shows that the price process of risky assets is a class of diffusion processes with jumps. The chapter presents some simulation-based methods for solving discrete time portfolio choice problems for multiperiod investments. The mean-variance approach has two problems pointed out by finance practitioners, private investors and researchers. The first problem is related to distributional assumptions concerning the behaviour of asset prices, and the second problem is related to the selection of the optimal portfolio depending on some objective function and/or utility function defined according to the investor’s goal.
