Show simple item record

dc.contributor.authorVan Staden, Pieter M.
dc.contributor.authorDang, Duy-Minh
dc.contributor.authorForsyth, Peter A. 18:59:43 (GMT) 18:59:43 (GMT)
dc.descriptionThe final publication is available at Elsevier via © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
dc.description.abstractWe investigate the time-consistent mean–variance (MV) portfolio optimization problem, popular in investment–reinsurance and investment-only applications, under a realistic context that involves the simultaneous application of different types of investment constraints and modelling assumptions, for which a closed-form solution is not known to exist. We develop an efficient numerical partial differential equation method for determining the optimal control for this problem. Central to our method is a combination of (i) an impulse control formulation of the MV investment problem, and (ii) a discretized version of the dynamic programming principle enforcing a time-consistency constraint. We impose realistic investment constraints, such as no trading if insolvent, leverage restrictions and different interest rates for borrowing/lending. Our method requires solution of linear partial integro-differential equations between intervention times, which is numerically simple and computationally effective. The proposed method can handle both continuous and discrete rebalancings. We study the substantial effect and economic implications of realistic investment constraints and modelling assumptions on the MV efficient frontier and the resulting investment strategies. This includes (i) a comprehensive comparison study of the pre-commitment and time-consistent optimal strategies, and (ii) an investigation on the significant impact of a wealth-dependent risk aversion parameter on the optimal controls.en
dc.description.sponsorshipNatural Sciences and Engineering Research Council of Canada ["RGPIN-2017-03760"]en
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International*
dc.subjectAsset allocationen
dc.subjectConstrained optimal controlen
dc.subjectImpulse controlen
dc.titleTime-consistent mean–variance portfolio optimization: A numerical impulse control approachen
dcterms.bibliographicCitationVan Staden, P. M., Dang, D.-M., & Forsyth, P. A. (2018). Time-consistent mean–variance portfolio optimization: A numerical impulse control approach. Insurance: Mathematics and Economics, 83, 9–28. doi:10.1016/j.insmatheco.2018.08.003en
uws.contributor.affiliation1Faculty of Mathematicsen
uws.contributor.affiliation2David R. Cheriton School of Computer Scienceen

Files in this item


This item appears in the following Collection(s)

Show simple item record

Attribution-NonCommercial-NoDerivatives 4.0 International
Except where otherwise noted, this item's license is described as Attribution-NonCommercial-NoDerivatives 4.0 International


University of Waterloo Library
200 University Avenue West
Waterloo, Ontario, Canada N2L 3G1
519 888 4883

All items in UWSpace are protected by copyright, with all rights reserved.

DSpace software

Service outages