Optimal investment strategies for asset-liability management with affine diffusion factor processes and HARA preferences

This paper investigates an optimal asset-liability management problem within the expected utility maximization framework. The general hyperbolic absolute risk aversion (HARA) is adopted to describe preference of manager. financial market comprises a risk-free asset and risky asset. price depends on affine diffusion factor process, which includes, but not limited to, constant elasticity variance (CEV), Stein-Stein, Schöbel Zhu, Heston, 3/2, 4/2 models, some non-Markovian as exceptional examples. accumulative liability process featured by generalized drifted Brownian motion with possibly unbounded drift coefficients. Due sophisticated structure HARA framework incomplete market, backward stochastic differential equation (BSDE) approach adopted. By solving recursively coupled BSDE system, closed-form expressions for both investment strategy value function are derived. Moreover, explicit solutions particular cases our model provided. Finally, numerical examples presented illustrate effect parameters strategies in several cases.