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Volume 10, Issue 1
Optimal Defined Contribution Pension Management with Salary and Risky Assets Following Jump Diffusion Processes

Xiaoyi Zhang & Junyi Guo

DOI: 10.4208/eajam.301218.170419

East Asian J. Appl. Math., 10 (2020), pp. 22-39.

Published online: 2020-01

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  • Abstract

The paper considers an optimal asset allocation problem for a defined contribution pension plan during the accumulation phase. The salary follows a stochastic process, which combines a compound Poisson jump with Brownian uncertainty. The plan aims to minimise the quadratic loss function over finite time horizon by investing in the market of risky assets and bank account. The risky assets are subjected to Poisson jump and Brownian motion. The closed-form optimal investment decision is derived from the corresponding Hamilton-Jacobi-Bellman equation.

  • Keywords

Compound Poisson process, defined contribution pension plan, stochastic optimal control, dynamic programming approach, Hamilton-Jacobi-Bellman equation.

  • AMS Subject Headings

97M30, 93E20

  • Copyright

COPYRIGHT: © Global Science Press

  • Email address

zhangxiaoyi19902@163.com (Xiaoyi Zhang)

jyguo@nankai.edu.cn (Junyi Guo)

  • BibTex
  • RIS
  • TXT
@Article{EAJAM-10-22, author = {Zhang , Xiaoyi and Guo , Junyi}, title = {Optimal Defined Contribution Pension Management with Salary and Risky Assets Following Jump Diffusion Processes}, journal = {East Asian Journal on Applied Mathematics}, year = {2020}, volume = {10}, number = {1}, pages = {22--39}, abstract = {

The paper considers an optimal asset allocation problem for a defined contribution pension plan during the accumulation phase. The salary follows a stochastic process, which combines a compound Poisson jump with Brownian uncertainty. The plan aims to minimise the quadratic loss function over finite time horizon by investing in the market of risky assets and bank account. The risky assets are subjected to Poisson jump and Brownian motion. The closed-form optimal investment decision is derived from the corresponding Hamilton-Jacobi-Bellman equation.

}, issn = {2079-7370}, doi = {https://doi.org/10.4208/eajam.301218.170419}, url = {http://global-sci.org/intro/article_detail/eajam/13576.html} }
TY - JOUR T1 - Optimal Defined Contribution Pension Management with Salary and Risky Assets Following Jump Diffusion Processes AU - Zhang , Xiaoyi AU - Guo , Junyi JO - East Asian Journal on Applied Mathematics VL - 1 SP - 22 EP - 39 PY - 2020 DA - 2020/01 SN - 10 DO - http://doi.org/10.4208/eajam.301218.170419 UR - https://global-sci.org/intro/article_detail/eajam/13576.html KW - Compound Poisson process, defined contribution pension plan, stochastic optimal control, dynamic programming approach, Hamilton-Jacobi-Bellman equation. AB -

The paper considers an optimal asset allocation problem for a defined contribution pension plan during the accumulation phase. The salary follows a stochastic process, which combines a compound Poisson jump with Brownian uncertainty. The plan aims to minimise the quadratic loss function over finite time horizon by investing in the market of risky assets and bank account. The risky assets are subjected to Poisson jump and Brownian motion. The closed-form optimal investment decision is derived from the corresponding Hamilton-Jacobi-Bellman equation.

XiaoyiZhang & JunyiGuo. (2020). Optimal Defined Contribution Pension Management with Salary and Risky Assets Following Jump Diffusion Processes. East Asian Journal on Applied Mathematics. 10 (1). 22-39. doi:10.4208/eajam.301218.170419
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