optimal portfolio choice in a regime-switching market with bankruptcy possibility for all risky assets

This paper develops a discrete-time multi-period mean-variance portfolio selection model in a regime-switching market under the assumption of bankruptcy possibility for all risky assets. when bankruptcy happens to a risky asset, investors can only retrieve a random fraction (i.e. the recovery rate) of the wealth that they should acquire. moreover, when anasset goes bankrupt, then becomes valueless and the investors do not invest in it any more. here, we assume that return of assets depend on the states of the market which is governed by a markov chain. this paper tries to model this issue and formulate the optimal portfolio selection under these conditions in the mean-variance framework.