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Dynamic mean-variance problem: recovering time-consistency
Event details of ASMF Seminar: Çağın Ararat (Bilkent University)
Date
21 June 2024
Time
12:30 -13:30
Room
0.09

Abstract

The dynamic mean-variance problem is a well-studied optimization problem that is known to be time-inconsistent. The main source of time-inconsistency is that the family of conditional variance functionals indexed by time fails to be recursive. We consider the mean-variance problem in a discrete-time setting and study an auxiliary dynamic vector optimization problem whose objective function consists of the conditional mean and conditional second moment. We show that the vector optimization problem satisfies a set-valued dynamic programming principle and is time-consistent in a generalized sense. Finally, we propose a computational procedure that relies on convex vector optimization and convex projection problems, and we use this procedure to calculate time-consistent solutions in discrete market models.

Speaker

Çağın Ararat (Bilkent University)

Roeterseilandcampus - building E

Room 0.09
Roetersstraat 11
1018 WB Amsterdam