Optimal investment strategies in the presence of a minimum guarantee

Deelstra, Griselda; Grasselli, Martino; Koehl, Pierre-François

doi:10.1016/s0167-6687(03)00153-7

Cited by 164 publications

(165 citation statements)

References 16 publications

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“…That is to say, the salary volatility is supposed to be a hedge able volatility whose risk source belongs to the set of the financial market risk sources. This is in accordance with the assumption [4], but is differs from those of [1] [12] who also suggest that the salary was influence by non hedgeable risk source (i.e., non-financial market).…”

Section: B T T R T T T T R T W T T B T T B T Tsupporting

confidence: 86%

Effect of Extra Contribution on Stochastic Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

Njoku¹,

Osu²,

Akpanibah³

et al. 2017

JMF

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In this paper, optimal investment strategies for defined contribution (DC) Pension, with extra contribution are studied. Our model permits the plan member to make a defined extra contribution, as provided in the Nigerian Pension Reform Act of 2004. The plan member is free to invest in risk-free asset, and in two risky assets. A stochastic differential equation of the pension wealth that takes into account certain agreed proportions of the plan member's salary, paid as contribution, and extra contribution towards the pension fund, is presented. The Hamilton-Jacobi-Bellman (H-J-B) equation, Legend transformation, and Dual theory are used to obtain the explicit solution of the optimal investment strategies for constant relative risk aversion (CRRA) utility function. We observed that the plan member will increase the proportion of his wealth to be invested in bond and stock and will reduce the proportion to be invested in cash.

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Section: B T T R T T T T R T W T T B T T B T Tsupporting

confidence: 86%

Effect of Extra Contribution on Stochastic Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

Njoku¹,

Osu²,

Akpanibah³

et al. 2017

JMF

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“…This is the approach taken in the recent papers of Boulier et al (2001) and Deelstra et al (2003) in defined contribution pension funds.…”

Section: Discussionmentioning

confidence: 99%

Optimal risk management in defined benefit stochastic pension funds

Josa-Fombellida

Rincón‐Zapatero

2004

Insurance: Mathematics and Economics

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We consider a continuous time dynamic pension funding model in a defined benefit plan of an employment system. The benefits liabilities are random, given by a geometric Brownian process. Three different situations are studied regarding the investment decisions taken by the sponsoring employer: in the first, the fund is invested at a constant, risk-free rate of interest; in the second, the promoter invests in a portfolio with n risky assets and a risk-free security; finally, it is supposed that the rate of return is stochastic. Modelling the preferences of the manager such that the main objective is to minimize both the contribution rate risk and the solvency risk, we study cases where the optimal behavior leads to a spread method of funding. JEL classification: G23; G11Subj. classification: E13; B81

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“…where σ r , σ S are positive constants defining the stock volatility, that is σ 2 r + σ 2 S , and the drift parameter µ S (r) is the instantaneous mean having the form µ S (r) = r +m S , with m S a constant representing the expected excess return from investing in the stock, as in Deelstra et al (2003), Battocchio and Menoncin (2004) or Menoncin (2005).…”

Section: The Financial Marketmentioning

confidence: 99%

“…Some of them are Boulier et al (2001), Battocchio and Menoncin (2004), Cairns et al (2006) and Menoncin (2005), where the interest rate is assumed to be of the Vasicek type. In Deelstra et al (2003), the interest rate has an affine structure, as in Duffie and Kan (1996) which includes as a special case the CIR and the Vasicek models. Other interesting papers where the interest rate is random, though in a discrete time are Vigna and Haberman (2001) and Haberman and Vigna (2002).…”

Section: Introductionmentioning

confidence: 99%

Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates

Josa-Fombellida

Rincón‐Zapatero

2010

European Journal of Operational Research

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In this paper we study the optimal management of an aggregated pension fund of defined benefit type, in the presence of a stochastic interest rate. We suppose that the sponsor can invest in a savings account, in a risky stock and in a bond with the aim of minimizing deviations of the unfunded actuarial liability from zero along a finite time horizon. We solve the problem by means of optimal stochastic control techniques and analyze the influence on the optimal solution of some of the parameters involved in the model. JEL Classification: C61, G11, G23.

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Optimal investment strategies in the presence of a minimum guarantee

Cited by 164 publications

References 16 publications

Effect of Extra Contribution on Stochastic Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

Effect of Extra Contribution on Stochastic Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

Optimal risk management in defined benefit stochastic pension funds

Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates

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