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Operations Research Transactions >

2019 , Vol. 23 >Issue 2: 44 - 56

DOI: https://doi.org/10.15960/j.cnki.issn.1007-6093.2019.02.004

Optimal investment strategy for the DC pension fund with Stein-Stein volatility and dynamic VaR constraint

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  • 1. School of Statistics, Lanzhou University of Finance and Economics, Lanzhou 730020, China;
    2. School of Mathematics, Lanzhou City University, Lanzhou 730070, China;
    3. Business School, Sun Yat-sen University, Guangzhou 510275, China

Received date: 2017-05-22

  Online published: 2019-06-15

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Abstract

In this paper, we consider the optimal asset allocation problem for the defined contribution pension plan on the phase of accumulation before retirement. We assume that the pension fund can be invested into a financial market consisting of a risk-free asset and a risky asset who's price process satisfies Stein-Stein stochastic volatility model. By using the method of stochastic optimal control, we obtain the optimal investment strategy of the pension fund without or with dynamic value at risk constraint aiming to maximize the expected utility of relative wealth at retirement time, and derive the corresponding analytic expression of the optimal value function. Finally, a numerical example is provided to verify the related theoretical results and the sensitivity of the optimal investment strategy on some parameters is analyzed.

Key words： DC pension fund; Stein-Stein volatility; Hamilton-Jacobi-Bellman equation; VaR constraint

Cite this article

SUN Jingyun, TIAN Lina, CHEN Zheng . Optimal investment strategy for the DC pension fund with Stein-Stein volatility and dynamic VaR constraint[J]. Operations Research Transactions, 2019 , 23(2) : 44 -56 . DOI: 10.15960/j.cnki.issn.1007-6093.2019.02.004

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