Mean-Variance Asset Liability Management with State-Dependent Risk Aversion
© 2017, Copyright © Society of Actuaries.This article investigates the asset liability management problem with state-dependent risk aversion under the mean-variance criterion. The investor allocates the wealth among multiple assets including a risk-free asset and multiple risky assets governed by a...
| Main Authors: | , , , |
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| Format: | Journal Article |
| Published: |
Society of Actuaries
2017
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| Online Access: | http://hdl.handle.net/20.500.11937/52312 |
| _version_ | 1848758897885577216 |
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| author | Zhang, Y. Wu, Yong Hong Li, S. Wiwatanapataphee, Benchawan |
| author_facet | Zhang, Y. Wu, Yong Hong Li, S. Wiwatanapataphee, Benchawan |
| author_sort | Zhang, Y. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | © 2017, Copyright © Society of Actuaries.This article investigates the asset liability management problem with state-dependent risk aversion under the mean-variance criterion. The investor allocates the wealth among multiple assets including a risk-free asset and multiple risky assets governed by a system of geometric Brownian motion stochastic differential equations, and the investor faces the risk of paying uncontrollable random liabilities. The state-dependent risk aversion is taken into account in our model, linking the risk aversion to the current wealth held by the investor. An extended Hamilton-Jacobi-Bellman system is established for the optimization of asset liability management, and by solving the extended Hamilton-Jacobi-Bellman system, the analytical closed-form expressions for the time-inconsistent optimal investment strategies and the optimal value function are derived. Finally, numerical examples are presented to illustrate our results. |
| first_indexed | 2025-11-14T09:51:18Z |
| format | Journal Article |
| id | curtin-20.500.11937-52312 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T09:51:18Z |
| publishDate | 2017 |
| publisher | Society of Actuaries |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-523122017-09-13T15:38:23Z Mean-Variance Asset Liability Management with State-Dependent Risk Aversion Zhang, Y. Wu, Yong Hong Li, S. Wiwatanapataphee, Benchawan © 2017, Copyright © Society of Actuaries.This article investigates the asset liability management problem with state-dependent risk aversion under the mean-variance criterion. The investor allocates the wealth among multiple assets including a risk-free asset and multiple risky assets governed by a system of geometric Brownian motion stochastic differential equations, and the investor faces the risk of paying uncontrollable random liabilities. The state-dependent risk aversion is taken into account in our model, linking the risk aversion to the current wealth held by the investor. An extended Hamilton-Jacobi-Bellman system is established for the optimization of asset liability management, and by solving the extended Hamilton-Jacobi-Bellman system, the analytical closed-form expressions for the time-inconsistent optimal investment strategies and the optimal value function are derived. Finally, numerical examples are presented to illustrate our results. 2017 Journal Article http://hdl.handle.net/20.500.11937/52312 10.1080/10920277.2016.1247719 Society of Actuaries restricted |
| spellingShingle | Zhang, Y. Wu, Yong Hong Li, S. Wiwatanapataphee, Benchawan Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title | Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title_full | Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title_fullStr | Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title_full_unstemmed | Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title_short | Mean-Variance Asset Liability Management with State-Dependent Risk Aversion |
| title_sort | mean-variance asset liability management with state-dependent risk aversion |
| url | http://hdl.handle.net/20.500.11937/52312 |