Optimal control of an objective functional with non-linearity between the conditional expectations: solutions to a class of time-inconsistent portfolio problems
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- Optimal control of an objective functional with
Accepted author manuscript, 599 KB, PDF document
We present a modified verification theorem for the equilibrium control of a general class of portfolio problems. The general class of portfolio problems studied in this paper, is characterized by an objective where the investor seeks to maximize a functional of two conditional expectations of terminal wealth. The objective functional is allowed to be non-linear in the conditional expectations, and thus the problem class is in general terms time-inconsistent. In addition, we provide a corrected proof of the verification theorem and apply the theorem to a number of quadratic, time-inconsistent portfolio problems and determine their solutions. Some of the quadratic portfolio problems have not previously been solved analytically.
Original language | English |
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Journal | Mathematical Methods of Operations Research |
Volume | 91 |
Issue number | 3 |
Pages (from-to) | 405-438 |
ISSN | 1432-2994 |
DOIs | |
Publication status | Published - 1 Jun 2020 |
- Equilibrium control laws, Optimal control, Quadratic portfolio problems, Time-inconsistency
Research areas
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