Wilfried Kuissi-Kamdem:
Asset-liability management with Epstein-Zin utility under stochastic interest rate and unknown market price of risk
Zeit und Ort
Mittwoch, 26.11.25, 16:00-17:30, Seminarraum 226 (HH10)
Zusammenfassung
In this talk we present a stochastic control problem with Epstein-Zin recursive utility under partial information (unknown market price of risk), in which an investor is constrained to a liability at the end of the investment period. Introducing liabilities is the main novelty of the model and appears for the first time in the literature of recursive utilities. Such constraint leads to a coupled forward-backward stochastic differential equation (FBSDE), which well-posedness has not been addressed in the literature. We derive an explicit solution to the FBSDE, contrasting with the existence and uniqueness results with no explicit expression of the solutions typically found in most related literature. Moreover, under minimal additional assumptions, we obtain the Malliavin differentiability of the solution of the FBSDE. We solve the problem completely and find the expression of the controls and the value function. Finally, we determine the utility loss that investors suffer from ignoring the fact that they can learn about the market price of risk.