A Multiperiod Equilibrium Pricing Model

Kwak, Minsuk; Pirvu, Traian A.; Zhang, Huayue

doi:10.1155/2014/408685

Cited by 6 publications

(3 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This paper follows Kwak et al (2013) and Pirvu and Zhang (2013) in introducing the subgame perfect portfolio strategies as a substitute for optimal investment strategy. Let us proceed with a formal definition.…”

Section: Subgame Perfect Strategymentioning

confidence: 99%

Portfolio Optimization under Correlation Constraint

Maheshwari

Pirvu

2019

SSRN Journal

View full text Add to dashboard Cite

We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation constraint is imposed on the portfolio and the non-tradable index at some benchmark time horizon. The goal is to maximize portofolio's expected exponential utility subject to the correlation constraint. Two types of optimal portfolio strategies are considered: the subgame perfect and the precommitment ones. We find analytical expressions for the constrained subgame perfect (CSGP) and the constrained precommitment (CPC) portfolio strategies. Both these portfolio strategies yield significantly lower risk when compared to the unconstrained setting, at the cost of a small utility loss. The performance of the CSGP and CPC portfolio strategies is similar.

show abstract

Section: Subgame Perfect Strategymentioning

confidence: 99%

Portfolio Optimization under Correlation Constraint

Maheshwari

Pirvu

2019

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Hence, the coefficient of risk aversion depending on the state of economy should be used in dynamic portfolio selection problems. Pirvu and Zhang (2013) and Kwak et al (2014) study exponential utility indifference pricing and optimal investment strategies under exponential utility with regime-switching risk aversion coefficient. Gordon and St-Amour (2000) show that a state-dependent risk aversion can explain asset price movements which cannot be explained by constant risk aversion.…”

Section: Introductionmentioning

confidence: 99%

Optimal investment for insurance company with exponential utility and wealth-dependent risk aversion coefficient

Delong

2019

Math Meth Oper Res

View full text Add to dashboard Cite

We investigate an exponential utility maximization problem for an insurer who faces a stream of non-hedgeable claims. The insurer's risk aversion coefficient changes in time and depends on the current insurer's net asset value (the excess of assets over liabilities). We use the notion of an equilibrium strategy and derive the HJB equation for our time-inconsistent optimization problem. We assume that the insurer's risk aversion coefficient consists of a constant risk aversion and a small amount of a wealth-dependent risk aversion. Using perturbation theory, the equilibrium value function, which solves the HJB equation, is expanded on the parameter controlling the degree of risk aversion depending on wealth. We find the first-order approximations to the equilibrium value function and the equilibrium investment strategy. Some new results for exponential utility maximization problem with constant risk aversion are derived in order to approximate the solution to our exponential utility maximization problem with wealth-dependent risk aversion.

show abstract

“…Regime switching modelling is present in many areas such as financial economics and management. In finance we point the interested reader to [20], [26], [27] and the references therein.…”

mentioning

confidence: 99%

Stochastic production planning with regime switching

Covei¹,

Canepa²,

Pirvu³

2023

JIMO

Self Cite

View full text Add to dashboard Cite

<p style='text-indent:20px;'>This paper considers a stochastic production planning problem with regime switching. There are two regimes corresponding to different economic cycles. A factory is planning its production so as to minimize production costs. We analyze this problem and the optimal production is characterized through an elliptic system of partial differential equations which can be numerically solved. We perform a sensitivity analysis for which we provide an intuition. A model risk analysis reveals the effect of adding regime switching to the modelling.</p>

show abstract

A Multiperiod Equilibrium Pricing Model

Cited by 6 publications

References 26 publications

Portfolio Optimization under Correlation Constraint

Portfolio Optimization under Correlation Constraint

Optimal investment for insurance company with exponential utility and wealth-dependent risk aversion coefficient

Stochastic production planning with regime switching

Contact Info

Product

Resources

About