Optimal control of an objective functional with non-linearity between the conditional expectations

Dato: 2019

Skrevet af:  E. Kryger, M. Nordfang & M. Steffensen

Publiceret i: Mathematical Methods of Operations Research (2019)

Abstract (på engelsk): 

We present a modified verification theorem for the equilibrium control of a general class of portfolio problems. The general class of portfolio problems studied in this paper, is characterized by an objective where the investor seeks to maximize a functional of two conditional expectations of terminal wealth. The objective functional is allowed to be non-linear in the conditional expectations, and thus the problem class is in general terms time-inconsistent. In addition, we provide a corrected proof of the verification theorem and apply the theorem to a number of quadratic, time-inconsistent portfolio problems and determine their solutions. Some of the quadratic portfolio problems have not previously been solved analytically.”