Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model | Zendy

Chu-Bing Zhang | Zendy; Ximing Rong | Zendy

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Optimal Investment Strategies for DC Pension with Stochastic Salary under the Affine Interest Rate Model

Author(s) -

Chu-Bing Zhang,

Ximing Rong

Publication year - 2013

Publication title -

discrete dynamics in nature and society

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.264

H-Index - 39

eISSN - 1607-887X

pISSN - 1026-0226

DOI - 10.1155/2013/297875

Subject(s) - vasicek model , interest rate , short rate model , affine transformation , bond , econometrics , stochastic modelling , economics , coupon , pension , salary , mathematics , finance , market economy , pure mathematics

We study the optimal investment strategies of DC pension, with the stochastic interest rate (including the CIR model and the Vasicek model) and stochastic salary. In our model, the plan member is allowed to invest in a risk-free asset, a zero-coupon bond, and a single risky asset. By applying the Hamilton-Jacobi-Bellman equation, Legendre transform, and dual theory, we find the explicit solutions for the CRRA and CARA utility functions, respectively

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