Optimal portfolios for the DC pension fund with mispricing under the HARA utility framework | Zendy

Zilan Liu | Zendy; Yijun Wang | Zendy; Ya Huang | Zendy; Jieming Zhou | Zendy

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Optimal portfolios for the DC pension fund with mispricing under the HARA utility framework

Author(s) -

Zilan Liu,

Yijun Wang,

Ya Huang,

Jieming Zhou

Publication year - 2022

Publication title -

journal of industrial and management optimization

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.325

H-Index - 32

eISSN - 1553-166X

pISSN - 1547-5816

DOI - 10.3934/jimo.2021228

Subject(s) - hamilton–jacobi–bellman equation , portfolio , dynamic programming , pension , economics , financial market , pension fund , mutual fund separation theorem , selection (genetic algorithm) , computer science , econometrics , mathematical optimization , mathematical economics , financial economics , mathematics , bellman equation , finance , artificial intelligence

This paper studies the optimal portfolio selection for defined contribution (DC) pension fund with mispricing. We adopt the general hyperbolic absolute risk averse (HARA) utility to describe the risk performance of the pension fund managers. The financial market comprises a risk-free asset, a pair of mispriced stocks, and the market index. Using the dynamic programming approach, we construct the Hamilton-Jacobi-Bellman (HJB) equation and obtain the explicit expressions for optimal portfolio choices with two methods. Finally, numerical analysis is presented to illustrate the sensitivity of the optimal portfolios to parameters of the financial market and contribution process. 200 words.

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