Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model
We are concerned with optimal investment strategy for a dual risk model. We assume that the company can invest into a risk-free asset and a risky asset. Short-selling and borrowing money are allowed. Due to lack of iterated-expectation property, the Bellman Optimization Principle does not hold. Thus...
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2014-01-01
|
| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2014/972487 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1832552820343046144 |
|---|---|
| author | Lidong Zhang Ximin Rong Ziping Du |
| author_facet | Lidong Zhang Ximin Rong Ziping Du |
| author_sort | Lidong Zhang |
| collection | DOAJ |
| description | We are concerned with optimal investment strategy for a dual risk model. We assume that the company can invest into a risk-free asset and a risky asset. Short-selling and borrowing money are allowed. Due to lack of iterated-expectation property, the Bellman Optimization Principle does not hold. Thus we investigate the precommitted strategy and time-consistent strategy, respectively. We take three steps to derive the precommitted investment strategy. Furthermore, the time-consistent investment strategy is also obtained by solving the extended Hamilton-Jacobi-Bellman equations. We compare the precommitted strategy with time-consistent strategy and find that these different strategies have different advantages: the former can make value function maximized at the original time t=0 and the latter strategy is time-consistent for the whole time horizon. Finally, numerical analysis is presented for our results. |
| format | Article |
| id | doaj-art-fd173876edbe432c98c72c22384bc35c |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-fd173876edbe432c98c72c22384bc35c2025-02-03T05:57:53ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2014-01-01201410.1155/2014/972487972487Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk ModelLidong Zhang0Ximin Rong1Ziping Du2School of Management, Tianjin University, Tianjin 300072, ChinaSchool of Science, Tianjin University, Tianjin 300072, ChinaCollege of Economics & Management, Tianjin University of Science Technology, Tianjin 300222, ChinaWe are concerned with optimal investment strategy for a dual risk model. We assume that the company can invest into a risk-free asset and a risky asset. Short-selling and borrowing money are allowed. Due to lack of iterated-expectation property, the Bellman Optimization Principle does not hold. Thus we investigate the precommitted strategy and time-consistent strategy, respectively. We take three steps to derive the precommitted investment strategy. Furthermore, the time-consistent investment strategy is also obtained by solving the extended Hamilton-Jacobi-Bellman equations. We compare the precommitted strategy with time-consistent strategy and find that these different strategies have different advantages: the former can make value function maximized at the original time t=0 and the latter strategy is time-consistent for the whole time horizon. Finally, numerical analysis is presented for our results.http://dx.doi.org/10.1155/2014/972487 |
| spellingShingle | Lidong Zhang Ximin Rong Ziping Du Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model Discrete Dynamics in Nature and Society |
| title | Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model |
| title_full | Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model |
| title_fullStr | Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model |
| title_full_unstemmed | Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model |
| title_short | Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a Dual Risk Model |
| title_sort | precommitted investment strategy versus time consistent investment strategy for a dual risk model |
| url | http://dx.doi.org/10.1155/2014/972487 |
| work_keys_str_mv | AT lidongzhang precommittedinvestmentstrategyversustimeconsistentinvestmentstrategyforadualriskmodel AT ximinrong precommittedinvestmentstrategyversustimeconsistentinvestmentstrategyforadualriskmodel AT zipingdu precommittedinvestmentstrategyversustimeconsistentinvestmentstrategyforadualriskmodel |