Precommitted investment strategy versus time-consistent investment strategy for a general risk model with diffusion

DOI10.1155/2014/358623MaRDI QIDQ1723926zbMATH OpenOpenAlexWikidataFDO

Authors Ziping Du, Lidong Zhang, Ximin Rong

Publication date 14 February 2019

Published in Abstract and Applied Analysis (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2014/358623

zbMATH Keywords

diffusiongeneral risk modelprecommitted investment strategy

Mathematics Subject Classification ID

Portfolio theory (91G10) Statistical methods; risk measures (91G70)

Review text

Summary: We mainly study a general risk model and investigate the precommitted strategy and the time-consistent strategy under mean-variance criterion, respectively. A Lagrange method is proposed to derive the precommitted investment strategy. Meanwhile from the game theoretical perspective, we find the time-consistent investment strategy by solving the extended Hamilton-Jacobi-Bellman equations. By comparing the precommitted strategy with the time-consistent strategy, we find that the company under the time-consistent strategy has to give up the better current utility in order to keep a consistent satisfaction over the whole time horizon. Furthermore, we theoretically and numerically provide the effect of the parameters on these two optimal strategies and the corresponding value functions.

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Cites work

• Benchmark and mean-variance problems for insurers
• Continuous-time mean-variance portfolio selection: a stochastic LQ framework
• Controlled Markov processes and viscosity solutions
• Dynamic mean-variance problem with constrained risk control for the insurers
• Optimal dynamic portfolio selection: multiperiod mean-variance formulation
• Optimal time-consistent investment and reinsurance strategies for insurers under Heston's SV model
• Time-consistent investment and reinsurance strategies for mean-variance insurers with jumps

Cited in

(3)

• On pre-commitment aspects of a time-consistent strategy for a mean-variance investor
• Precommitted investment strategy versus time-consistent investment strategy for a dual risk model
• Pre-commitment vs. time-consistent strategies for the generalized multi-period portfolio optimization with stochastic cash flows

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