The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market
How do investors require a distribution of the wealth among multiple risky assets while facing the risk of the uncontrollable payment for random liabilities? To cope with this problem, firstly, this paper explores the approach of asset-liability management under the state-dependent risk aversion wit...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2021-01-01
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| Series: | Journal of Function Spaces |
| Online Access: | http://dx.doi.org/10.1155/2021/5476781 |
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| author | Shuang Li Yu Yang Yanli Zhou Yonghong Wu Xiangyu Ge |
| author_facet | Shuang Li Yu Yang Yanli Zhou Yonghong Wu Xiangyu Ge |
| author_sort | Shuang Li |
| collection | DOAJ |
| description | How do investors require a distribution of the wealth among multiple risky assets while facing the risk of the uncontrollable payment for random liabilities? To cope with this problem, firstly, this paper explores the approach of asset-liability management under the state-dependent risk aversion with only risky assets, which has been considered under a continuous-time Markov regime-switching setting. Next, based on this realistic modelling, an extended Hamilton-Jacob-Bellman (HJB) system has been necessarily established for solving the optimization problem of asset-liability management. It has been derived closed-form analytical expressions applied in the time-inconsistent investment with optimal control theory to see that happens to the optimal value of the function. Ultimately, numerical examples presented with comparisons of the analytical results under different market conditions are exposed to analyse numerically the developed mean variance asset liability management strategy. We find that our proposed model can explain the financial phenomena more effectively and accurately. |
| format | Article |
| id | doaj-art-e316d2e472ba4209a2c59e56fd496046 |
| institution | Kabale University |
| issn | 2314-8888 |
| language | English |
| publishDate | 2021-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Function Spaces |
| spelling | doaj-art-e316d2e472ba4209a2c59e56fd4960462025-02-03T01:03:41ZengWileyJournal of Function Spaces2314-88882021-01-01202110.1155/2021/5476781The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching MarketShuang Li0Yu Yang1Yanli Zhou2Yonghong Wu3Xiangyu Ge4Department of Mathematics and PhysicsDepartment of Mathematics and StatisticsSchool of FinanceDepartment of Mathematics and StatisticsSchool of Statistics and MathematicsHow do investors require a distribution of the wealth among multiple risky assets while facing the risk of the uncontrollable payment for random liabilities? To cope with this problem, firstly, this paper explores the approach of asset-liability management under the state-dependent risk aversion with only risky assets, which has been considered under a continuous-time Markov regime-switching setting. Next, based on this realistic modelling, an extended Hamilton-Jacob-Bellman (HJB) system has been necessarily established for solving the optimization problem of asset-liability management. It has been derived closed-form analytical expressions applied in the time-inconsistent investment with optimal control theory to see that happens to the optimal value of the function. Ultimately, numerical examples presented with comparisons of the analytical results under different market conditions are exposed to analyse numerically the developed mean variance asset liability management strategy. We find that our proposed model can explain the financial phenomena more effectively and accurately.http://dx.doi.org/10.1155/2021/5476781 |
| spellingShingle | Shuang Li Yu Yang Yanli Zhou Yonghong Wu Xiangyu Ge The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market Journal of Function Spaces |
| title | The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market |
| title_full | The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market |
| title_fullStr | The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market |
| title_full_unstemmed | The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market |
| title_short | The Study of Mean-Variance Risky Asset Management with State-Dependent Risk Aversion under Regime Switching Market |
| title_sort | study of mean variance risky asset management with state dependent risk aversion under regime switching market |
| url | http://dx.doi.org/10.1155/2021/5476781 |
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