Title
Dynamic Asset Pricing with Mean-variance Preferences
Abstract
This paper studies an endowment economy with dynamically consistent mean-variance preferences in an incomplete market. Adopting a game-theoretic framework, we derive an explicit characterization of the market equilibrium through a necessary and sufficient condition for open-loop equilibrium strategies. Combining this condition with market clearing, we identify the set of admissible stock price processes. The model is analytically tractable and yields exact closed-form solutions. We provide detailed discussions for dividend processes following both geometric Brownian motion (GBM) and Cox-Ingersoll-Ross (CIR) dynamics.
Bio
Chengxiu Hua is a doctoral student in the Department of Mathematics at Southern University of Science and Technology.