Optimal Asset-Liability Management with Constraints: A Dynamic Programming Approach

ABSTRACT This paper is devoted to the analysis of a discrete time dynamic programming algorithm %for the numerical solution of an optimal asset-liability management model with transaction costs and in presence of constraints. By exploiting the financial properties of the model, we propose a new approximation method for the classical Dynamic Programming algorithm. The regularity of the value function is used to estimate the global error introduced by the numerical procedure and to prove a convergence result.