Abstract
Due to the time inconsistency issue of multiperiod mean-CVaR model, two important policies of the model with finite states, the pre-committed policy and the time consistent policy, are derived and discussed. The pre-committed policy, which is global optimal for the model, is solved through linear programming. A detailed analysis shows that the pre-committed policy doesn’t satisfy time consistency in efficiency either, i.e., the truncated pre-committed policy is not efficient for the remaining short term mean-CVaR problem. The time consistent policy, which is the subgame Nash equilibrium policy of the multiperson game reformulation of the model, takes a piecewise linear form of the current wealth level and the coefficients can be derived by a series of integer programming problems and two linear programming problems. The difference between two polices indicates the degree of time inconsistency.
This research work was partially supported by the National Natural Science Foundation of China under grant 71201094.
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Cui, X., Shi, Y. (2015). Multiperiod Mean-CVaR Portfolio Selection. In: Le Thi, H., Pham Dinh, T., Nguyen, N. (eds) Modelling, Computation and Optimization in Information Systems and Management Sciences. Advances in Intelligent Systems and Computing, vol 359. Springer, Cham. https://doi.org/10.1007/978-3-319-18161-5_25
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DOI: https://doi.org/10.1007/978-3-319-18161-5_25
Publisher Name: Springer, Cham
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