Abstract
Defined contribution and annuity contract are merged into one pension plan to study both accumulation phase and distribution phase, which results in such effects that both phases before and after retirement being “defined”. Under the Heston’s stochastic volatility model, this paper focuses on mean-variance insurers with the return of premiums clauses to study the optimal time-consistent investment strategy for the DC pension merged with an annuity contract. Both accumulation phase before retirement and distribution phase after retirement are studied. In the time-consistent framework, the extended Hamilton-Jacobi-Bellman equations associated with the optimization problem are established. Applying stochastic optimal control technique, the time-consistent explicit solutions of the optimal strategies and the efficient frontiers are obtained. In addition, numerical analysis illustrates our results and also deepens our knowledge or understanding of the research results.
Highlights
Annuity contract and defined contribution are merged into one pension plan to study both accumulation phase and distribution phase, which results in such effects that both phases before and after retirement being “defined,” making the defined contribution plans even more portable and of great convenience for insurance companies.Annuity is any financial contract providing continuing payment with a fixed total amount on fixed time interval which usually can be once a year
Under the Heston’s stochastic volatility model, this paper focuses on mean-variance insurers with the return of premiums clauses to study the optimal timeconsistent investment strategy for the Defined contribution (DC) pension merged with an annuity contract
We study a whole pension plan that the DC pension plan with the return of premiums clauses is merged with annuity contract under the meanvariance criterion to find an optimal time consistent strategy under the Heston’s stochastic volatility model which can describe the volatility of risk asset more perfectly
Summary
Annuity contract and defined contribution are merged into one pension plan to study both accumulation phase and distribution phase, which results in such effects that both phases before and after retirement being “defined,” making the defined contribution plans even more portable and of great convenience for insurance companies. We study a whole pension plan that the DC pension plan with the return of premiums clauses is merged with annuity contract under the meanvariance criterion to find an optimal time consistent strategy under the Heston’s stochastic volatility model which can describe the volatility of risk asset more perfectly. Both accumulation phase before retirement and distribution phase after retirement of pension plan are studied in detail.
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