Peer-Reviewed Journal Details
Mandatory Fields
Wei, J;Wong, KC;Yam, SCP;Yung, SP
2013
July
Insurance: Mathematics and Economics
Markowitz's mean-variance asset-liability management with regime switching: A time-consistent approach
Published
12 ()
Optional Fields
PORTFOLIO SELECTION MODEL OPTIMIZATION
53
281
291
In this article, we provide the first study in the time consistent solution of the mean-variance asset liability-management (MVALM). The framework is even considered under a continuous time Markov regime-switching setting. Using the extended Hamilton-Jacobi-Bellman equation (HJB) (see Bjork and Murgoci (2010)), we show that the time consistent equilibrium control is state dependent in the sense that it depends on the uncontrollable liability process, which is in substantial contrast with the time consistent solution of the similar problem in Bjork and Murgoci (2010), in which it is independent of the state. Finally, we give a numerical comparison between our work with the corrected version (as obtained here) of pre-commitment strategy in Chen et al. (2008). Crown Copyright (c) 2013 Published by Elsevier B.V. All rights reserved.
AMSTERDAM
0167-6687
10.1016/j.insmatheco.2013.05.008
Grant Details