English, Article, Journal or magazine article edition: Optimal Portfolio Strategies with Stochastic Wage Income : The Case of A defined Contribution Pension Plan Paolo BATTOCCHIO

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/178716
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Optimal Portfolio Strategies with Stochastic Wage Income : The Case of A defined Contribution Pension Plan
Author
  • Paolo BATTOCCHIO
Physical Description
  • preprint
Notes
  • 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. The fund manager must cope with a set of stochastic investment opportunities and with the uncertainty involved by the labor market. After introducing a stochastic interest rate, we assume a market structure characterized by three assets : a riskless asset, a bond and a stock. Moreover, we introduce a stochastic process for salaries, and develop the model according to the stochastic dynamic programming methodology. We show that the optimal portofolio is formed by three components : a speculative component proportional to the market price of risk of the two risky assets through the relative risk aversion index, an hedging component proportional to the diffusion term of the interest rate, and a preference-free hedging component proportional to the volatilities of the salary process. Finally, after specifying a suitable fucntional form for the drift term of the salary process, we find a close form solution to the asset allocation problem.
  • defined-contribution pension plan;salary risk;stochastic optimal control;Hamilton-Jacobi-Bellman equation
  • RePEc:ctl:louvir:2002005
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment