Optimal control of an objective functional with non-linearity between the conditional expectations: solutions to a class of time-inconsistent portfolio problems
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- Optimal control of an objective functional with
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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.
Originalsprog | Engelsk |
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Tidsskrift | Mathematical Methods of Operations Research |
Vol/bind | 91 |
Udgave nummer | 3 |
Sider (fra-til) | 405-438 |
ISSN | 1432-2994 |
DOI | |
Status | Udgivet - 1 jun. 2020 |
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