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Time Consistent Strategies for Mean-Variance Asset-Liability Management Problems

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  • Hui-qiang Ma
  • Meng Wu
  • Nan-jing Huang

Abstract

This paper studies the optimal time consistent investment strategies in multiperiod asset-liability management problems under mean-variance criterion. By applying time consistent model of Chen et al. (2013) and employing dynamic programming technique, we derive two-time consistent policies for asset-liability management problems in a market with and without a riskless asset, respectively. We show that the presence of liability does affect the optimal strategy. More specifically, liability leads a parallel shift of optimal time-consistent investment policy. Moreover, for an arbitrarily risk averse investor (under the variance criterion) with liability, the time-diversification effects could be ignored in a market with a riskless asset; however, it should be considered in a market without any riskless asset.

Suggested Citation

  • Hui-qiang Ma & Meng Wu & Nan-jing Huang, 2013. "Time Consistent Strategies for Mean-Variance Asset-Liability Management Problems," Mathematical Problems in Engineering, Hindawi, vol. 2013, pages 1-16, October.
    • Handle: RePEc:hin:jnlmpe:709129
    DOI: 10.1155/2013/709129
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