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Optimal investment of DC pension plan with incentive scheme and a combined VaR-ES constraint

Author

Listed:
  • Chengjin Tang
  • Yinghui Dong
  • Chengzhe Wang
  • Congjin Zhou

Abstract

We investigate an optimal investment problem under a combined value-at-risk (VaR) and expected-shortfall (ES) constraint faced by a defined contribution (DC) pension fund manager with an incentive scheme. We apply a concavification technique and a Lagrange dual method to solve the problem and derive the closed-form representation of the optimal solution. Numerical results show that a combined VaR-ES constraint can provide better protection for the relatively bad economic states than a single ES or VaR constraint in a non concave utility maximization problem, which is different from the result obtained from Dong, Tang, and Hua (2024) in the corresponding concave optimization problem that a single ES constraint provides better protection for the bad economic states than a single VaR or a combined VaR-ES constraint.

Suggested Citation

  • Chengjin Tang & Yinghui Dong & Chengzhe Wang & Congjin Zhou, 2026. "Optimal investment of DC pension plan with incentive scheme and a combined VaR-ES constraint," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 55(1), pages 102-131, January.
    • Handle: RePEc:taf:lstaxx:v:55:y:2026:i:1:p:102-131
    DOI: 10.1080/03610926.2025.2488898
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