Optimal investment for the defined-contribution pension with stochastic salary under a CEV model

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Affiliation of Author(s):Tianjin University

Journal:APPLIED MATHEMATICS-A JOURNAL OF CHINESE UNIVERSITIES SERIES B

Place of Publication:China

Key Words:Defined contribution pension plan; Stochastic salary; constant elasticity of variance model; optimal

Abstract:In this paper, we study the optimal investment strategy of defined-contribution pension with the stochastic salary. The investor is allowed to invest in a risk-free asset and a risky asset whose price process follows a constant elasticity of variance model. The stochastic salary follows a stochastic differential equation, whose instantaneous volatility changes with the risky asset price all the time. The HJB equation associated with the optimal investment problem is established, and the explicit solution of the corresponding optimization problem for the CARA utility function is obtained .

All the Authors:Zhang Chubing, Rong XImin, Zhao Hui

First Author:Zhang Chubing

Indexed by:Unit Twenty Basic Research

Correspondence Author:Zhang CHubing

Document Code:SCI: 163XX

Volume:28

Issue:2

Page Number:187-203

ISSN No.:1005-1031

Translation or Not:no