Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098987 | Journal of Economic Dynamics and Control | 2012 | 19 Pages |
Abstract
During the accumulation phase of a defined-contribution pension scheme, a scheme member invests part of their stochastic income in a portfolio of a stock and a bond in order to build up sufficient funds for retirement. It is assumed that the remainder of their salary pre-retirement is consumed, an annuity is purchased at retirement, and the stock allocation and consumption pre-retirement maximise the total expected lifetime consumption using a CARA utility function. Perfect correlation between the scheme member's income and the stock price leads to analytical expressions for the controls for a general income model. If the correlation is imperfect then analytical controls are found for two particular stochastic income models.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Paul Emms,