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  • An Chen (a1) and Łukasz Delong (a2)

We 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 of I states (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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ASTIN Bulletin: The Journal of the IAA
  • ISSN: 0515-0361
  • EISSN: 1783-1350
  • URL: /core/journals/astin-bulletin-journal-of-the-iaa
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