Optimal Pension Management under Stochastic Interest Rates, Wages and Inflation

Battocchio, Paolo;Menoncin, Francesco
(2002)

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  • Battocchio, Paolo
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  • Menoncin, Francesco
    Author
Abstract
We consider a stochastic model for a defined-contribution pension fund in continuous time. In particular, we focus on the portfolio problem of a fund manager who wants to maximize the expected utility of his terminal wealth in a complete financial market with stochastic interest rate. The fund manager must cope with two background risks : the salary risk and the inflation risk. We find a closed form solution for the asset allocation problem and so we are able to analyse in detail the behaviour of the optimal portfolio with respect to salary and inflation. Finally, a numerical smulation is presented.
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Battocchio, P., & Menoncin, F. (2002). Optimal Pension Management under Stochastic Interest Rates, Wages and Inflation (ECON Working Papers 2002/21). https://hdl.handle.net/2078.5/35435