Continuous time mean variance asset allocation: A time-consistent strategy |
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Authors: | J Wang PA Forsyth |
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Institution: | David R. Cheriton School of Computer Science, University of Waterloo, Waterloo ON, Canada N2L 3G1 |
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Abstract: | We develop a numerical scheme for determining the optimal asset allocation strategy for time-consistent, continuous time, mean variance optimization. Any type of constraint can be applied to the investment policy. The optimal policies for time-consistent and pre-commitment strategies are compared. When realistic constraints are applied, the efficient frontiers for the pre-commitment and time-consistent strategies are similar, but the optimal investment strategies are quite different. |
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Keywords: | Time-consistent mean variance asset allocation Piecewise constant policy timestepping Constrained policies |
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