This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Optimal Portfolio Strategies with Stochastic Wage Income and Inflation: The Case of a Defined Contribution Pension Plan

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Paolo Battocchio () (Università degli Studi di Trieste, Dipartimento di Matematica Applicata)
Francesco Menoncin () (Université Catholique de Louvain, IRES (Institut de Recherches Economiques et Sociales))

Additional information is available for the following registered author(s):

Abstract

We consider a stochastic model for a defined-contribution pension fund in continuous time. In particular, we focus on the portfolio problem of a fund manager who wants to maximize the expected utility of his terminal wealth in a complete financial market with stochastic interest rate. The fund manager must cope with a set of stochastic investment opportunities and two background risks: the salary risk and the inflation risk. We use the stochastic dynamic programming approach. We show that the presence of the inflation risk can solve some problems linked to the use of the stochastic dynamic programming technique, and namely to the stochastic partial differential equation deriving from it. We find a closed form solution to the asset allocation problem, without specifying any functional form for the coe±cients of the diffusion processes involved in the problem. Finally, the derivation of a closed form solution allows us to analyse in detail the behaviour of the optimal portfolio with respect to salary and inflation.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cerp.unito.it/index.php/en/publications/working-papers/77-optimal-portfolio-strategies-with-stochastic-wage-income-and-inflation-the-case-of-a-defined-contribution-pension-plan
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Silvia Maero)
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 19.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 28 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:crp:wpaper:19

Contact details of provider:
Postal: Via Real Collegio 30, 10024 Moncalieri (TO)
Phone: 39 011 6705040
Fax: +39 011 6705042
Email:
Web page: http://cerp.unito.it
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Silvia Maero).

Related research
Keywords: defined-contribution pension plan; salary risk; inflation risk; stochastic optimal control; Hamilton-Jacobi-Bellman equation;

Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paolo BATTOCCHIO & Francesco MENONCIN, 2002. "Optimal Pension Management under Stochastic Interest Rates, Wages, and Inflation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
Statistics
Access and download statistics

Did you know? You may want to explore EconPapers, which displays the same data as IDEAS in a different way.

This page was last updated on 2009-10-20.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.