Equilibrium of Time-Inconsistent Stochastic Linear--Quadratic Control

Equilibrium of Time-Inconsistent Stochastic Linear--Quadratic Control

Thu, 10/11/2011
13:00 		Hanqing Jin Mathematical Finance Internal Seminar Add to calendar DH 1st floor SR
Equilibrium of Time-Inconsistent Stochastic Linear–Quadratic Control
In this work, we study equilibrium solutions for a LQ control problem with state-dependent terms in the objective, which destroy the time-consisitence of a pre-commited optimal solution. We get a sufficient condition for equilibrium by a system of stochastic differential equations. When the coefficients in the problem are all deterministic, we find an explicit equilibrium for general LQ control problem. For the mean-variance portfolio selection in a complete financial market, we also get an explicit equilibrium with random coefficient of the financial.