Open-loop equilibrium strategy for mean-variance asset-liability management with margin requirements

Qian Zhao and Jiaqin Wei

Communications in Statistics - Theory and Methods, 2022, vol. 51, issue 13, 4296-4312

Abstract: This paper considers a mean-variance asset-liability management problem in which short-selling is allowed, but accompanied by margin requirements. This is a mean-variance problem with a non linear state process. We derive a sufficient condition and a necessary condition for the time-consistent equilibrium strategy by using a system of forward backward stochastic differential equations. By decoupling this system, we obtain the unique equilibrium strategy. As a byproduct, we also get the equilibrium strategy for the mean-variance asset-liability management problem under short-selling prohibition.

Date: 2022
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DOI: 10.1080/03610926.2020.1812656

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