scholarly journals Optimal investment policy for a company under inflation risk

2020 ◽  
Vol 7 (1) ◽  
pp. 125-130
Author(s):  
ZHONGHUA ZHU
Keyword(s):  
Price Index ◽  
Optimal Investment ◽  
Investment Policy ◽  
Risky Asset ◽  
Hjb Equations ◽  
Inflation Risk ◽  
Closed Form Solutions ◽  
Terminal Wealth ◽  
Investment Control ◽  
A Company

In this paper, we consider the optimal investment control problem for a company who worries about inflation risk. We assume that the company is self-financing. The decision maker of the company can invest in a financial market consisting of two assets: one risk-free asset, one risky asset. Our purpose is to find the impacts of inflation on optimal investment policy. With the objective of maximizing the CRRA utility of terminal wealth, the closed-form solutions of the optimal investment policy are obtained by solving HJB equations. We find that the optimal investment policy is affected by the correlation coefficient between the price of risky asset and price index.

scholarly journals Robust Time-Consistent Portfolio Selection for an Investor under CEV Model with Inflation Influence

2020 ◽  
Vol 2020 ◽  
pp. 1-14
Author(s):  
Peng Yang
Keyword(s):  
Probability Measure ◽  
Financial Market ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Risky Asset ◽  
Control Technique ◽  
Model Parameters ◽  
Cev Model ◽  
Terminal Wealth ◽  
Optimal Investment Strategy

A robust time-consistent optimal investment strategy selection problem under inflation influence is investigated in this article. The investor may invest his wealth in a financial market, with the aim of increasing wealth. The financial market includes one risk-free asset, one risky asset, and one inflation-indexed bond. The price process of the risky asset is governed by a constant elasticity of variance (CEV) model. The investor is ambiguity-averse; he doubts about the model setting under the original probability measure. To dispel this concern, he seeks a set of alternative probability measures, which are absolutely continuous to the original probability measure. The objective of the investor is to seek a time-consistent strategy so as to maximize his expected terminal wealth meanwhile minimizing his variance of the terminal wealth in the worst-case scenario. By using the stochastic optimal control technique, we derive closed-form solutions for the optimal time-consistent investment strategy, the probability scenario, and the value function. Finally, the influences of model parameters on the optimal investment strategy and utility loss function are examined through numerical experiments.

scholarly journals Optimal Investment Strategy for DC Pension Plan with Stochastic Income and Inflation Risk under the Ornstein–Uhlenbeck Model

Mathematics ◽  
2021 ◽  
Vol 9 (15) ◽  
pp. 1756
Author(s):  
Yang Wang ◽  
Xiao Xu ◽  
Jizhou Zhang
Keyword(s):  
Control Method ◽  
Closed Form Solution ◽  
Pension Plan ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Risky Asset ◽  
Legendre Transform ◽  
Defined Contribution ◽  
Inflation Risk ◽  
Optimal Investment Strategy

This paper is concerned with the optimal investment strategy for a defined contribution (DC) pension plan. We assumed that the financial market consists of a risk-free asset and a risky asset, where the risky asset is subject to the Ornstein–Uhlenbeck (O-U) process, and stochastic income and inflation risk were also considered in the model. We firstly derived the Hamilton–Jacobi–Bellman (HJB) equation through the stochastic control method. Secondly, under the logarithmic utility function, the closed-form solution of optimal asset allocation was obtained by using the Legendre transform method. Finally, we give several numerical examples and a financial analysis.

Growth Optimal Investment Strategy: The Impact of Reallocation Frequency and Heavy Tails

2012 ◽  
Vol 13 (2) ◽  
pp. 228-240 ◽  
Author(s):  
G. Bamberg ◽  
A. Neuhierl
Keyword(s):  
Heavy Tails ◽  
Geometric Mean ◽  
Asymptotic Optimality ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Risky Asset ◽  
Optimal Investment Strategy ◽  
Optimality Properties ◽  
Heavy Tailed ◽  
The Impact

Abstract The strategy to maximize the long-term growth rate of final wealth (maximum expected log strategy, maximum geometric mean strategy, Kelly criterion) is based on probability theoretic underpinnings and has asymptotic optimality properties. This article reviews the allocation of wealth in a two-asset economy with one risky asset and a risk-free asset. It is also shown that the optimal fraction to be invested in the risky asset (i) depends on the length of the basic return period and (ii) is lower for heavy-tailed log returns than for light-tailed log returns.

On the Distribution of Terminal Wealth under Dynamic Mean-Variance Optimal Investment Strategies

2021 ◽  
Vol 12 (2) ◽  
pp. 566-603
Author(s):  
Pieter M. van Staden ◽  
Duy-Minh Dang ◽  
Peter A. Forsyth
Keyword(s):  
Optimal Investment ◽  
Investment Strategies ◽  
Terminal Wealth ◽  
Mean Variance

scholarly journals Robust Optimal Excess-of-Loss Reinsurance and Investment Problem with Delay and Dependent Risks

2019 ◽  
Vol 2019 ◽  
pp. 1-21
Author(s):  
Yan Zhang ◽  
Peibiao Zhao
Keyword(s):  
Investment Strategy ◽  
Risky Asset ◽  
Exponential Utility ◽  
Heston Model ◽  
Verification Theorem ◽  
Terminal Wealth ◽  
Investment Problem ◽  
Dependent Risks ◽  
Insurance Business ◽  
Explicit Expressions

This paper investigates a robust optimal excess-of-loss reinsurance and investment problem with delay and dependent risks for an ambiguity-averse insurer (AAI). The AAI’s wealth process is assumed to be two dependent classes of insurance business. He/she can purchase excess-of-loss reinsurance from the reinsurer and invest in a risk-free asset and a risky asset whose price follows Heston model. We obtain the explicit expressions of the optimal excess-of-loss reinsurance and investment strategy by maximizing the expected exponential utility of AAI’s terminal wealth. Finally, we give the proof of the verification theorem. Our models and results posed here can be regarded as a generalization of the existing results in the literature.

scholarly journals Optimal Investment of DC Pension Plan under Incentive Schemes and Loss Aversion

2020 ◽  
Vol 2020 ◽  
pp. 1-14
Author(s):  
Yinghui Dong ◽  
Wenxin Lv ◽  
Siyuan Wei ◽  
Yeyang Gong
Keyword(s):  
Closed Form ◽  
Loss Aversion ◽  
Pension Plan ◽  
Optimal Investment ◽  
Numerical Results ◽  
Managerial Compensation ◽  
Incentive Schemes ◽  
Terminal Wealth ◽  
Portfolio Problem ◽  
Form Representation

We investigate the DC pension manager’s portfolio problem when the manager is remunerated through two schemes for DC pension managerial compensation under loss aversion and minimum guarantee. We apply the concavification technique and a static Lagrangian technique to solve the problem and derive the closed-form representation of the optimal wealth and portfolio processes. Theoretical and numerical results show that the incentive schemes can significantly impact the distribution of the optimal terminal wealth.

A note on the optimal investment policy of the regulated firm

1976 ◽  
Vol 4 (3) ◽  
pp. 51-55 ◽  
Author(s):  
David W. Peterson ◽  
James H. Vander Weide
Keyword(s):  
Optimal Investment ◽  
Investment Policy ◽  
Regulated Firm
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