Discrete-time mean-variance portfolio optimization with Markov switching parameters

In this paper, a discrete-time version of the multi-period mean-variance portfolio selection problem in which the market parameters are subjected to a random regime switching is investigated. We analytically derive an optimal control policy for this mean-variance formulation in a closed form. Such a policy can be obtained by the solution of a set of interconnected Riccatti difference equations. Additionally, an explicit expression for the efficient frontier corresponding to this control law is identified and a numerical example with Brazilian assets is presented