Precommitted Investment Strategy versus Time-Consistent Investment Strategy for a General Risk Model with Diffusion. (9th April 2014)

• Record Type: Journal Article
• Authors: Zhang, Lidong; Rong, Ximin; Du, Ziping
• Other Names: Zhou Guanglu Academic Editor.
• Is Part Of: Abstract and applied analysis. Volume 2014(2014)
• Publication Date: 2014-04-09
• Subjects: Mathematical analysis -- Periodicals; Mathematical analysis; Applied Mathematics; Mathematical Analysis; Periodicals; 515.05
• DOI: 10.1155/2014/358623
• Languages: English
• ISSNs: 1085-3375

Abstract

Abstract : We mainly study a general risk model and investigate the precommitted strategy and the time-consistent strategy under mean-variance criterion, respectively. A lagrange method is proposed to derive the precommitted investment strategy. Meanwhile from the game theoretical perspective, we find the time-consistent investment strategy by solving the extended Hamilton-Jacobi-Bellman equations. By comparing the precommitted strategy with the time-consistent strategy, we find that the company under the time-consistent strategy has to give up the better current utility in order to keep a consistent satisfaction over the whole time horizon. Furthermore, we theoretically and numerically provide the effect of the parameters on these two optimal strategies and the corresponding value functions.