Time Consistent Strategies for Mean-Variance Asset-Liability Management Problems

Hui-qiang Ma, Meng Wu and Nan-jing Huang

Mathematical Problems in Engineering, 2013, vol. 2013, 1-16

Abstract:

This paper studies the optimal time consistent investment strategies in multiperiod asset-liability management problems under mean-variance criterion. By applying time consistent model of Chen et al. (2013) and employing dynamic programming technique, we derive two-time consistent policies for asset-liability management problems in a market with and without a riskless asset, respectively. We show that the presence of liability does affect the optimal strategy. More specifically, liability leads a parallel shift of optimal time-consistent investment policy. Moreover, for an arbitrarily risk averse investor (under the variance criterion) with liability, the time-diversification effects could be ignored in a market with a riskless asset; however, it should be considered in a market without any riskless asset.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:709129

DOI: 10.1155/2013/709129

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