Continuous time mean-variance portfolio optimization with piecewise state-dependent risk aversion |
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| Authors: | Xiangyu Cui Lu Xu Yan Zeng |
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| Affiliation: | 1.School of Statistics and Management, Shanghai Key Laboratory of Financial Information Technology,Shanghai University of Finance and Economics,Shanghai,China;2.School of Statistics and Management,Shanghai University of Finance and Economics,Shanghai,China;3.Lingnan (University) College,Sun Yat-sen University,Guangzhou,China |
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| Abstract: | ![]()
In this paper, a continuous time mean-variance portfolio optimization problem is considered within a game theoretic framework, where the risk aversion function is assumed to depend on the current wealth level and the discounted (preset) investment target. We derive the explicit time consistent investment policy, and find that if the current wealth level is less (larger) than the discounted investment target, the future wealth level along the time consistent investment policy is always less (larger) than the discounted investment target. |
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