Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4959571 | European Journal of Operational Research | 2017 | 26 Pages |
Abstract
In this paper, we study the dual control approach for the optimal asset allocation problem in a continuous-time regime-switching market. We find the lower and upper bounds of the value function that is a solution to a system of fully coupled nonlinear partial differential equations. These bounds can be tightened with additional controls to the dual process. We suggest a Monte-Carlo algorithm for computing the tight lower and upper bounds and show the method is effective with a variety of utility functions, including power, non-HARA and Yaari utilities. The latter two utilities are beyond the scope of any current methods available in finding the value function.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Jingtang Ma, Wenyuan Li, Harry Zheng,