{"title":"Short Communication: Is a Sophisticated Agent Always a Wise One?","authors":"Jianfeng Zhang","doi":"10.1137/23m1569137","DOIUrl":null,"url":null,"abstract":"For time-inconsistent optimal control problems, a quite popular approach is the equilibrium approach, taken by sophisticated agents. In this short note, we construct a deterministic continuous-time example where the unique equilibrium is dominated by another control. Therefore, in this situation, it may not be wise to take the equilibrium strategy.","PeriodicalId":48880,"journal":{"name":"SIAM Journal on Financial Mathematics","volume":null,"pages":null},"PeriodicalIF":1.4000,"publicationDate":"2023-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"SIAM Journal on Financial Mathematics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1137/23m1569137","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
For time-inconsistent optimal control problems, a quite popular approach is the equilibrium approach, taken by sophisticated agents. In this short note, we construct a deterministic continuous-time example where the unique equilibrium is dominated by another control. Therefore, in this situation, it may not be wise to take the equilibrium strategy.
期刊介绍：
SIAM Journal on Financial Mathematics (SIFIN) addresses theoretical developments in financial mathematics as well as breakthroughs in the computational challenges they encompass. The journal provides a common platform for scholars interested in the mathematical theory of finance as well as practitioners interested in rigorous treatments of the scientific computational issues related to implementation. On the theoretical side, the journal publishes articles with demonstrable mathematical developments motivated by models of modern finance. On the computational side, it publishes articles introducing new methods and algorithms representing significant (as opposed to incremental) improvements on the existing state of affairs of modern numerical implementations of applied financial mathematics.
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