Time Consistent Strategies for Mean-Variance Asset-Liability Management Problems

Abstract EN

This paper studies the optimal time consistent investment strategies in multiperiod asset-liability management problems under mean-variance criterion.

By applying time consistent model of Chen et al.

(2013) and employing dynamic programming technique, we derive two-time consistent policies for asset-liability management problems in a market with and without a riskless asset, respectively.

We show that the presence of liability does affect the optimal strategy.

More specifically, liability leads a parallel shift of optimal time-consistent investment policy.

Moreover, for an arbitrarily risk averse investor (under the variance criterion) with liability, the time-diversification effects could be ignored in a market with a riskless asset; however, it should be considered in a market without any riskless asset.