Abstract
In this paper we recall and summarize results on a dynamic stochastic accumulation model for determining optimal decision between stock and bond investments during accumulation of pension savings. We assume stock prices to be driven by a geometric Brownian motion whereas interest rates are modeled by means of a one factor interest rate model. It turns out that the optimal decision representing stock to bond proportion is a function of the duration of saving, the level of savings and the short rate. We furthermore summarize the results of testing the model on the fully funded second pillar of the Slovak pension system.
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This work has been supported by ERDF-017/2009/4.1/OPVaV-CESIUK and VEGA 1/0381/09 projects.
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Melicherčík, I., Ševčovič, D. (2012). Dynamic model of pension savings management with stochastic interest rates and stock returns. In: Perna, C., Sibillo, M. (eds) Mathematical and Statistical Methods for Actuarial Sciences and Finance. Springer, Milano. https://doi.org/10.1007/978-88-470-2342-0_35
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DOI: https://doi.org/10.1007/978-88-470-2342-0_35
Publisher Name: Springer, Milano
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