Optimal asset allocation for pension funds under mortality risk during the accumulation and ecumulation phases
Paolo Battocchio,
Francesco Menoncin (menoncin@eco.unibs.it) and
Olivier Scaillet
FAME Research Paper Series from International Center for Financial Asset Management and Engineering
Abstract:
In a financial market with one riskless asset and n risky assets following geometric Brownian motions, we solve the problem of a pension fund maximizing 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 different. 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.
Keywords: pension fund; mortality risk; asset allocation (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2003-01
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Citations: View citations in EconPapers (6)
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Related works:
Journal Article: Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases (2007)
Working Paper: Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases (2003)
Working Paper: Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases (2003)
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