Abstract
The constant elasticity of variance(CEV) model was constructed to study a defined contribution pension plan where benefits were paid by annuity. It also presents the process that the Legendre transform and dual theory can be applied to find an optimal investment policy during a participant’s whole life in the pension plan. Finally, two explicit solutions to exponential utility function in the two different periods (before and after retirement) are revealed. Hence, the optimal investment strategies in the two periods are obtained.
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Communicated by CHENG Chang-jun
Project supported by the Science Foundation of Central South University of Forestry and Technology (No.06010A).
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Xiao, Jw., Yin, Sh. & Qin, Cl. Constant elasticity of variance model and analytical strategies for annuity contracts. Appl Math Mech 27, 1499–1506 (2006). https://doi.org/10.1007/s10483-006-1107-z
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DOI: https://doi.org/10.1007/s10483-006-1107-z
Key words
- defined contribution pension plan
- stochastic optimal control
- CEV model
- Legendre transform
- analytical strategy