scholarly journals Multi-period optimal investment choice post-retirement with inter-temporal restrictions in a defined contribution pension plan

2020 ◽  
Vol 16 (6) ◽  
pp. 2857-2890
Author(s):  
Huiling Wu ◽  
◽  
Xiuguo Wang ◽  
Yuanyuan Liu ◽  
Li Zeng ◽  
...  
Keyword(s):  
Pension Plan ◽  
Optimal Investment ◽  
Defined Contribution ◽  
Investment Choice ◽  
Defined Contribution Pension Plan

scholarly journals The Role of Inflation-indexed Bond in Optimal Management of Defined Contribution Pension Plan During the Decumulation Phrase

2018 ◽  
Author(s):  
Xiaoyi Zhang ◽  
Junyi Guo
Keyword(s):  
Pension Plan ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Programming Approach ◽  
Defined Contribution ◽  
Inflation Risk ◽  
Dynamic Programming Approach ◽  
Optimal Investment Strategy ◽  
Defined Contribution Pension Plan ◽  
Hamilton Jacobi Bellman

In this paper we investigate the optimal investment strategy for a defined contribution (DC) pension plan during the decumulation phrase which is risk-averse and pays close attention to inflation risk. The plan aims to maximize the expected constant relative risk aversion (CRRA) utility from the terminal wealth by investing the wealth in a financial market consisting of an inflation-indexed bond, an ordinary zero coupon bond and a risk-free asset. We derive the optimal investment strategy in closed-form using the dynamic programming approach by solving the corresponding Hamilton-Jacobi-Bellman (HJB) equation. Our theoretical and numerical results reveal that under some rational assumptions, an inflation-indexed bond do has significant advantage to hedge inflation risk.

The effect of age on portfolio choices: evidence from an Italian pension fund

2014 ◽  
Vol 13 (4) ◽  
pp. 389-419 ◽  
Author(s):  
GIUSEPPE CAPPELLETTI ◽  
GIOVANNI GUAZZAROTTI ◽  
PIETRO TOMMASINO
Keyword(s):  
Stock Prices ◽  
Older Workers ◽  
Fixed Effects ◽  
Pension Plan ◽  
Defined Contribution ◽  
Risky Assets ◽  
Portfolio Choices ◽  
Defined Contribution Pension Plan ◽  
Recent Financial Crisis ◽  
Effect Of Age

AbstractAccording to optimal portfolio theories, investors should reduce their exposure to stock market risk as they grow old. Indeed, older workers, with only a few years left before retirement, are particularly vulnerable to unexpected falls in stock prices. Despite the theoretical and – as shown by the recent financial crisis – policy relevance of the issue, empirical evidence on this topic has been scant and inconclusive. The aim of the present paper is to assess the effect of age on portfolio choices, using a new panel dataset from an Italian defined-contribution pension plan. We find that on average holdings of risky assets do indeed significantly decrease with age. However, the effect is non-linear, being much stronger in the last part of one's career. Moreover, we also document that inertial behaviour is quite widespread, and can be very costly. Results are confirmed when we control for individual fixed effects and cohort effects.

The effects of risk aversion and density of contribution on comparisons of administrative charges in individual account pension systems

2016 ◽  
Vol 16 (1) ◽  
pp. 1-20 ◽  
Author(s):  
LUIS CHAVEZ-BEDOYA
Keyword(s):  
Risk Aversion ◽  
Pension System ◽  
Pension Plan ◽  
Defined Contribution ◽  
Individual Retirement Accounts ◽  
Terminal Wealth ◽  
Individual Account ◽  
Retirement Accounts ◽  
Defined Contribution Pension Plan ◽  
Accumulation Phase

AbstractThis paper studies the effects of risk aversion and density of contribution (DoC) on comparisons of proportional charges on flow (contributions) and balance (assets) during the accumulation phase of a defined-contribution pension plan in a system of individual retirement accounts. If the participant's degree of risk aversion increases and both charges yield the same expected terminal wealth, then the charge on balance improves with respect to the charge on flow when performing comparisons that examine the ratio between the resulting expected utilities of terminal wealth. When this methodology is applied to the Peruvian Private Pension System, empirical results demonstrate that the aforementioned result also holds for arbitrary charges on flow and balance and that the effect of DoC on these comparisons is nearly negligible for most of the assessed scenarios.

scholarly journals Optimization of the Actuarial Model of Defined Contribution Pension Plan

2014 ◽  
Vol 2014 ◽  
pp. 1-7
Author(s):  
Yan Li ◽  
Yuchen Huang ◽  
Yancong Zhou
Keyword(s):  
Pension Plan ◽  
Pension Plans ◽  
Current Status ◽  
Defined Contribution ◽  
Replacement Ratio ◽  
Investment Rate ◽  
Defined Contribution Pension Plan ◽  
Actuarial Model

The paper focuses on the actuarial models of defined contribution pension plan. Through assumptions and calculations, the expected replacement ratios of three different defined contribution pension plans are compared. Specially, more significant considerable factors are put forward in the further cost and risk analyses. In order to get an assessment of current status, the paper finds a relationship between the replacement ratio and the pension investment rate using econometrics method. Based on an appropriate investment rate of 6%, an expected replacement ratio of 20% is reached.

OPTIMAL INVESTMENT FOR A DEFINED-CONTRIBUTION PENSION SCHEME UNDER A REGIME SWITCHING MODEL

2015 ◽  
Vol 45 (2) ◽  
pp. 397-419 ◽  
Author(s):  
An Chen ◽  
Łukasz Delong
Keyword(s):  
Asset Allocation ◽  
Regime Switching ◽  
Pension Plan ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Switching Behavior ◽  
Pension Scheme ◽  
Defined Contribution ◽  
State Of The Economy ◽  
Plan Member

AbstractWe study an asset allocation problem for a defined-contribution (DC) pension scheme in its accumulation phase. We assume that the amount contributed to the pension fund by a pension plan member is coupled with the salary income which fluctuates randomly over time and contains both a hedgeable and non-hedgeable risk component. We consider an economy in which macroeconomic risks are existent. We assume that the economy can be in one ofIstates (regimes) and switches randomly between those states. The state of the economy affects the dynamics of the tradeable risky asset and the contribution process (the salary income of a pension plan member). To model the switching behavior of the economy we use a counting process with stochastic intensities. We find the investment strategy which maximizes the expected exponential utility of the discounted excess wealth over a target payment, e.g. a target lifetime annuity.

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