LU Jiaxin, DONG Hua, . Optimal Investment Strategy for the DC Pension Plan Based on Minimum Guarantee and S-Shaped Utility[J]. Chinese Journal of Applied Probability and Statistics, 2024, 40(6): 891-909.
Citation: LU Jiaxin, DONG Hua, . Optimal Investment Strategy for the DC Pension Plan Based on Minimum Guarantee and S-Shaped Utility[J]. Chinese Journal of Applied Probability and Statistics, 2024, 40(6): 891-909.

Optimal Investment Strategy for the DC Pension Plan Based on Minimum Guarantee and S-Shaped Utility

  • In this paper, we assume that pension plan managers tend to be risk averse to gains and risk seeking to losses, so S-shaped utility function is considered. The goal of this paper is to maximize the expected utility of the real terminal surplus of a DC pension plan, which is the part of the terminal wealth that exceeds the annual guarantee, under minimum guarantee and S-shaped utility. We first transform the original problem to a self-financing problem. Then we apply Lagrange dual method, concavification technique and martingale method to derive the expressions of the optimal surplus process and the optimal trading strategies. Finally, we also carry out some numerical analysis to show the impacts of model parameters on the optimal terminal surplus and trading strategies.
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