Equilibrium for regular-singular control under mean-variance criterion: A unified approach via control laws
arXiv:2607.26635
The paper investigates mixed regular‑singular control problems under a mean‑variance objective, introducing a time‑consistent equilibrium concept and providing verification results, with an explicit coupled equilibrium solution illustrated for a reinsurance model.
Abstract
This paper studies a class of mixed regular-singular control problems under mean-variance criteria, where the drift and diffusion are allowed to depend on both the regular control and the level of singular control. We seek time-consistent equilibrium strategies in an intrapersonal game setting and propose a novel equilibrium notion where both regular and singular controls are unified via control laws, or equivalently, mappings on the augmented state space. Under which, we derive a verification theorem and necessary conditions providing a full mathematical characterization of the equilibrium. We apply the theory to a reinsurance problem. The equilibrium solution turns out to be nontrivially coupled, where the regular control depends on the level of singular control, and the free boundary of the singular control switches dynamically in accordance with the variation of the regular control expression. The free boundary is characterized in a piecewise semi-explicit manner and is proved to be across the switching point. In the degenerate case , the coupled solution reduces to the combination of two independent single-control equilibria and coincides with the limit as the parameter tends to zero.