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Optimal investment and consumption strategies for pooled annuity with partial information

Author

Listed:
  • Xie, Lin
  • Chen, Lv
  • Qian, Linyi
  • Li, Danping
  • Yang, Zhixin

Abstract

This paper considers the optimal investment and consumption problem for the pooled annuity funds, in which both the financial market and the mortality hazard rate of participants in the pool are partially observable. We manage to achieve the explicit expressions for optimal consumption and investment strategies employing filtering techniques and Hamilton-Jacobi-Bellman (HJB) equation. What is more, we also discuss the models where both the instantaneous rate of return of financial market and mortality of plan members are observable and obtain the optimal investment strategies accordingly. In addition, we look into this optimization problem under different exit mechanism including infinite exit time for the plan members. Last, but not the least, we carry out numerical analysis demonstrating the impact of observability of information.

Suggested Citation

  • Xie, Lin & Chen, Lv & Qian, Linyi & Li, Danping & Yang, Zhixin, 2023. "Optimal investment and consumption strategies for pooled annuity with partial information," Insurance: Mathematics and Economics, Elsevier, vol. 108(C), pages 129-155.
    • Handle: RePEc:eee:insuma:v:108:y:2023:i:c:p:129-155
    DOI: 10.1016/j.insmatheco.2022.11.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal consumption and investment strategies; Partial information; Stochastic control; Filtering theory;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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