Continuous-time mean-variance asset-liability management with stochastic interest rates and inflation risks
Huai-Nian Zhu, Cheng-Ke Zhang, Zhuo Jin
Journal of Industrial and Management Optimization | American Institute of Mathematical Sciences | Published : 2020
This paper investigates a continuous-time Markowitz mean-variance asset-liability management (ALM) problem under stochastic interest rates and inflation risks. We assume that the company can invest in n +1assets: one risk-free bond and n risky stocks. The risky stock's price is governed by a geometric Brownian motion (GBM), and the uncontrollable liability follows a Brownian motion with drift, respectively. The correlation between the risky assets and the liability is considered. The objective is to minimize the risk (measured by variance) of the terminal wealth subject to a given expected terminal wealth level. By applying the Lagrange multiplier method and stochastic control approach, we ..View full abstract
Awarded by National Natural Science Foundation of China
Awarded by Natural Science Foundation of Guangdong Province
Awarded by Distinguished Innovation Program of Education Commission of Guangdong Province
This research is supported by National Natural Science Foundation of China (Nos.71571053, 71673061), Natural Science Foundation of Guangdong Province (Nos.2015A030310218, 2016A030313701, 2018A030313687) and Distinguished Innovation Program of Education Commission of Guangdong Province (N0.2015WTSCX014).