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Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases

Collection
  • Cahiers de recherche; 2003.03
Publication date2003
Abstract

In a financial market with one riskless asset and n risky assets following geometric Brownian motions, we solve the problem of a pension fundmaximizing the expected CRRA utility of its terminal wealth. By considering a stochastic death time for a subscriber, we solve a unique problem for both accumulation and decumulation phases. We show that the optimal asset allocation during these two phases must be di¤erent. In particular, during the first phase the investment in the risky assets should decrease through time to meet future contractual pension payments while, during the second phase, the risky investment should increase through time because of closeness of death time. Our findings also suggest that it is not optimal to manage the two phases separately.

eng
Keywords
  • Pension fund
  • Mortality risk
  • Asset allocation
NoteMSC 2000 : 62P05, 91B28, 91B30, 91B70, 93E20
Citation (ISO format)
BATTOCCHIO, Paolo, MENONCIN, Francesco, SCAILLET, Olivier. Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases. 2003
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Identifiers
  • PID : unige:5805
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Creation04/15/2010 12:20:19 PM
First validation04/15/2010 12:20:19 PM
Update time03/11/2024 4:08:37 PM
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