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A stochastic Nash equilibrium portfolio game between two DC pension funds

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  • Guan, Guohui
  • Liang, Zongxia

Abstract

In this paper, we study the stochastic Nash equilibrium portfolio game between two pension funds under inflation risks. The financial market consists of cash, bond and two stocks. It is assumed that the price index is derived through a generalized Fisher equation while the bond is related to the price index to hedge the risk of inflation. Besides, these two pension managers can invest in their familiar stocks. The goal of the pension managers is to maximize the utility of the weighted terminal wealth and relative wealth. Dynamic programming method is employed to derive the Nash equilibrium strategies. In the end, a numerical analysis is presented to reveal the economic behaviors of the two DC pension funds.

Suggested Citation

  • Guan, Guohui & Liang, Zongxia, 2016. "A stochastic Nash equilibrium portfolio game between two DC pension funds," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 237-244.
    • Handle: RePEc:eee:insuma:v:70:y:2016:i:c:p:237-244
    DOI: 10.1016/j.insmatheco.2016.06.015
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    References listed on IDEAS

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    1. Curatola, Giuliano, 2022. "Price impact, strategic interaction and portfolio choice," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Yanfei Bai & Zhongbao Zhou & Helu Xiao & Rui Gao & Feimin Zhong, 2019. "A hybrid stochastic differential reinsurance and investment game with bounded memory," Papers 1910.09834, arXiv.org.
    3. Asmussen, Søren & Christensen, Bent Jesper & Thøgersen, Julie, 2019. "Nash equilibrium premium strategies for push–pull competition in a frictional non-life insurance market," Insurance: Mathematics and Economics, Elsevier, vol. 87(C), pages 92-100.
    4. Josa-Fombellida, Ricardo & López-Casado, Paula, 2023. "A defined benefit pension plan game with Brownian and Poisson jumps uncertainty," European Journal of Operational Research, Elsevier, vol. 310(3), pages 1294-1311.
    5. Josa-Fombellida, Ricardo & Rincón-Zapatero, Juan Pablo, 2019. "Equilibrium strategies in a defined benefit pension plan game," European Journal of Operational Research, Elsevier, vol. 275(1), pages 374-386.
    6. Yan, Ming & Peng, Fanyi & Zhang, Shuhua, 2017. "A reinsurance and investment game between two insurance companies with the different opinions about some extra information," Insurance: Mathematics and Economics, Elsevier, vol. 75(C), pages 58-70.
    7. Yanfei Bai & Zhongbao Zhou & Helu Xiao & Rui Gao & Feimin Zhong, 2021. "A stochastic Stackelberg differential reinsurance and investment game with delay in a defaultable market," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 94(3), pages 341-381, December.
    8. Zhao, Hui & Wang, Suxin, 2022. "Optimal investment and benefit adjustment problem for a target benefit pension plan with Cobb-Douglas utility and Epstein-Zin recursive utility," European Journal of Operational Research, Elsevier, vol. 301(3), pages 1166-1180.
    9. Lanying Sun & Changhao Su & Xinghui Xian, 2020. "Assessing the Sustainability of China’s Basic Pension Funding for Urban and Rural Residents," Sustainability, MDPI, vol. 12(7), pages 1-17, April.
    10. Xiaoyi Zhang & Junyi Guo, 2018. "The Role of Inflation-Indexed Bond in Optimal Management of Defined Contribution Pension Plan During the Decumulation Phase," Risks, MDPI, vol. 6(2), pages 1-16, March.
    11. Guan, Guohui & Hu, Jiaqi & Liang, Zongxia, 2022. "Robust equilibrium strategies in a defined benefit pension plan game," Insurance: Mathematics and Economics, Elsevier, vol. 106(C), pages 193-217.
    12. Bai, Yanfei & Zhou, Zhongbao & Xiao, Helu & Gao, Rui & Zhong, Feimin, 2022. "A hybrid stochastic differential reinsurance and investment game with bounded memory," European Journal of Operational Research, Elsevier, vol. 296(2), pages 717-737.
    13. Guohui Guan & Jiaqi Hu & Zongxia Liang, 2021. "Robust equilibrium strategies in a defined benefit pension plan game," Papers 2103.09121, arXiv.org.

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    More about this item

    Keywords

    IB13; IB81; IE11; Defined contribution pension plan; Stochastic portfolio game; Nash equilibrium; Inflation risk; Dynamic programming method;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • 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

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