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Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

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  • Chubing Zhang
  • Ximing Rong

Abstract

We study the optimal investment strategies of DC pension, with the stochastic interest rate (including the CIR model and the Vasicek model) and stochastic salary. In our model, the plan member is allowed to invest in a risk-free asset, a zero-coupon bond, and a single risky asset. By applying the Hamilton-Jacobi-Bellman equation, Legendre transform, and dual theory, we find the explicit solutions for the CRRA and CARA utility functions, respectively.

Suggested Citation

  • Chubing Zhang & Ximing Rong, 2013. "Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model," Discrete Dynamics in Nature and Society, Hindawi, vol. 2013, pages 1-11, March.
    • Handle: RePEc:hin:jnddns:297875
    DOI: 10.1155/2013/297875
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    Cited by:

    1. Yang Wang & Xiao Xu & Jizhou Zhang, 2021. "Optimal Investment Strategy for DC Pension Plan with Stochastic Income and Inflation Risk under the Ornstein–Uhlenbeck Model," Mathematics, MDPI, vol. 9(15), pages 1-15, July.
    2. Guan, Guohui & Liang, Zongxia & Xia, Yi, 2023. "Optimal management of DC pension fund under the relative performance ratio and VaR constraint," European Journal of Operational Research, Elsevier, vol. 305(2), pages 868-886.

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