Dual control Monte-Carlo method for tight bounds of value function in regime switching utility maximization

作者：Ma, Jingtang; Li, Wenyuan; Zheng, Harry^*

来源：European Journal of Operational Research, 2017, 262(3): 851-862.

DOI：10.1016/j.ejor.2017.04.056

• Portfolio optimization
• Regime switching
• Dual control
• Non-HARA utility
• Yaari utility
• Tight lower and upper bounds
• Monte-Carlo method

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.

• 出版日期2017-11-1
• 单位西南财经大学