Time-consistent portfolio management
From MaRDI portal
Abstract: This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption and life insurance, or a time varying aggregation rate lead to time inconsistency. As a consequence, the optimal strategies are not implementable. We focus on hyperbolic discounting, which has received much attention lately, especially in the area of behavioural finance. Following [10], we consider the resulting problem as a leader-follower game between successive selves, each of whom can commit for an infinitesimally small amount of time. We then define policies as subgame perfect equilibrium strategies. Policies are characterized by an integral equation which is shown to have a solution. Although we work on CRRA preference paradigm, our results can be extended for more general preferences as long as the equations admit solutions. Numerical simulations reveal that for the Merton problem with hyperbolic discounting, the consumption increases up to a certain time, after which it decreases; this pattern does not occur in the case of exponential discounting, and is therefore known in the litterature as the "consumption puzzle". Other numerical experiments explore the effect of time varying aggregation rate on the insurance premium.
Recommendations
Cited in
(95)- Consumption and portfolio rules for time-inconsistent investors
- Equilibrium consumption and portfolio decisions with stochastic discount rate and time-varying utility functions
- Time-consistent stopping under decreasing impatience
- A paradox in time-consistency in the mean-variance problem?
- Optimal investment for insurance company with exponential utility and wealth-dependent risk aversion coefficient
- Optimal investment strategy under time-inconsistent preferences and high-water mark contract
- Mean-variance investment and contribution decisions for defined benefit pension plans in a stochastic framework
- Equilibrium controls in time inconsistent stochastic linear quadratic problems
- Optimal dividend strategies with time-inconsistent preferences
- Consumption, investment and life insurance strategies with heterogeneous discounting
- Comparison theorems for some backward stochastic Volterra integral equations
- Time-consistent portfolio optimization
- A time-inconsistent Dynkin game: from intra-personal to inter-personal equilibria
- Annuity and insurance choice under habit formation
- Consumption and portfolio decisions with uncertain lifetimes
- Nonrecursive separation of risk and time preferences
- Optimal equilibrium barrier strategies for time-inconsistent dividend problems in discrete time
- A solution method for heterogeneity involving present bias
- A zero-sum game between a singular stochastic controller and a discretionary stopper
- A non-exponential discounting time-inconsistent stochastic optimal control problem for jump-diffusion
- Characterizations of equilibrium controls in time inconsistent mean-field stochastic linear quadratic problems. I
- Portfolio selection with regime-switching and state-dependent preferences
- Optimal sharing rule for a household with a portfolio management problem
- Robust optimal consumption-investment strategy with non-exponential discounting
- Inconsistent investment and consumption problems
- Time-inconsistent optimal control problem with random coefficients and stochastic equilibrium HJB equation
- Time-inconsistent consumption-investment problem for a member in a defined contribution pension plan
- Asset allocation, sustainable withdrawal, longevity risk and non-exponential discounting
- Optimal dividend strategies with time-inconsistent preferences and transaction costs in the Cramér-Lundberg model
- Goal-based portfolio choice model with discounted preference
- Non-constant discounting and consumption, portfolio and life insurance rules
- Time-consistent investment and reinsurance strategies for mean-variance insurers with jumps
- Optimal investment, consumption and life insurance under mean-reverting returns: the complete market solution
- Optimal time-consistent investment and reinsurance strategies for mean-variance insurers with state dependent risk aversion
- Finite horizon consumption and portfolio decisions with stochastic hyperbolic discounting
- On dividend strategies with non-exponential discounting
- Linear-quadratic time-inconsistent mean field games
- Exponential utility maximization for an insurer with time-inconsistent preferences
- Conditional optimal stopping: a time-inconsistent optimization
- Optimal life insurance and annuity demand under hyperbolic discounting when bequests are luxury goods
- Conditional LQ time-inconsistent Markov-switching stochastic optimal control problem for diffusion with jumps
- Quasi-hyperbolic discounting under recursive utility and consumption-investment decisions
- Equilibrium dividend strategy with non-exponential discounting in a dual model
- Optimal dividend-financing strategies in a dual risk model with time-inconsistent preferences
- Consumption-investment strategies with non-exponential discounting and logarithmic utility
- Closed-loop equilibrium strategies for general time-inconsistent optimal control problems
- On Finding Equilibrium Stopping Times for Time-Inconsistent Markovian Problems
- Time-consistent mean-variance reinsurance-investment strategy for insurers under CEV model
- Investment-consumption with regime-switching discount rates
- The optimal equilibrium for time-inconsistent stopping problems -- the discrete-time case
- Optimal dividend strategy for a general diffusion process with time-inconsistent preferences and ruin penalty
- Diversified Portfolios in Continuous Time *
- Optimal equilibria for multidimensional time-inconsistent stopping problems
- Controlled Markov chains with non-exponential discounting and distribution-dependent costs
- Strong and weak equilibria for time-inconsistent stochastic control in continuous time
- Mean-variance portfolio selection with non-negative state-dependent risk aversion
- A stochastic production planning problem
- Who are I: time inconsistency and intrapersonal conflict and reconciliation
- Tail optimality and preferences consistency for intertemporal optimization problems
- Consumption-leisure-investment strategies with time-inconsistent preference in a life-cycle model
- Equilibrium dividend strategies for spectrally negative Lévy processes with time value of ruin and random time horizon
- On the equilibrium strategies for time-inconsistent problems in continuous time
- Failure of smooth pasting principle and nonexistence of equilibrium stopping rules under time-inconsistency
- Time-Inconsistent Linear Quadratic Optimal Control Problems for Stochastic Evolution Equations
- On time-inconsistent stochastic control in continuous time
- Mean-Variance Portfolio Selection under a Non-Markovian Regime-Switching Model: Time-Consistent Solutions
- Time-consistent mean-variance reinsurance-investment in a jump-diffusion financial market
- Linear-quadratic optimal control problems for mean-field stochastic differential equations -- time-consistent solutions
- Time-inconsistent portfolio investment problems
- Closed-Loop Equilibrium for Time-Inconsistent McKean--Vlasov Controlled Problem
- Time Inconsistency, Precommitment, and Equilibrium Strategies for a Stackelberg Game
- Time-inconsistent view on a dividend problem with penalty
- Time-consistent lifetime portfolio selection under smooth ambiguity
- Optimal dividend and capital injection strategies in common shock dependence model with time-inconsistent preferences
- Subgame-perfect equilibrium strategies for time-inconsistent recursive stochastic control problems
- PORTFOLIO CHOICE WITH TIME HORIZON RISK
- Time-inconsistent stochastic linear-quadratic control problem with indefinite control weight costs
- Equilibrium investment with random risk aversion
- Nonlocality, nonlinearity, and time inconsistency in stochastic differential games
- Investment-consumption-insurance optimisation problem with multiple habit formation and non-exponential discounting
- Equilibrium dividend strategies in the dual model with a random time horizon
- A life insurance model with asymmetric time preferences
- Optimal life insurance and annuity decisions under money illusion
- The continuous-time pre-commitment KMM problem in incomplete markets
- Time-consistent consumption, investment, and proportional reinsurance in market models with Markovian regime switching
- Consumption-investment and reinsurance problem under Markovian regime switching: time-consistent solution
- Equilibrium investment strategy with learning about equity return
- On time-inconsistency in mean-field games
- Portfolio time consistency and utility weighted discount rates
- On stochastic control problems with higher-order moments
- Robust time-consistent portfolio selection for an investor under CEV model with inflation influence
- Optimal control of an objective functional with non-linearity between the conditional expectations: solutions to a class of time-inconsistent portfolio problems
- Non-exponential discounting portfolio management with habit formation
- Investment and consumption without commitment
- Time-consistent investment strategy under partial information
This page was built for publication: Time-consistent portfolio management
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4902203)
