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Markowitz's mean-variance asset-liability management with regime switching: A time-consistent approach

Wong, Kwok Chuen orcid logoORCID: 0000-0001-7639-338X, Wei, J., Wong, K. C., Yam, S. C. P. and Yung, S. P. (2013) Markowitz's mean-variance asset-liability management with regime switching: A time-consistent approach. Insurance: Mathematics and Economics, 53 . pp. 281-291. ISSN 0167-6687

Abstract
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.
Metadata
Item Type:Article (Published)
Refereed:Yes
Uncontrolled Keywords:Asset–liability management; Mean–variance; Regime switching; Time consistent feedback control; Extended Hamilton–Jacobi–Bellman
Subjects:Mathematics
Mathematics > Mathematical analysis
DCU Faculties and Centres:DCU Faculties and Schools > Faculty of Science and Health
DCU Faculties and Schools > Faculty of Science and Health > School of Mathematical Sciences
Publisher:Elsevier
Official URL:https://www.sciencedirect.com/science/article/pii/...
Copyright Information:Author
ID Code:31246
Deposited On:16 Jul 2025 11:04 by Vidatum Academic . Last Modified 16 Jul 2025 11:04
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