Modeling mispricing risk of defined contribution pension plan with a mean–variance criteria

Peiguang Wang, Zihui Wang and Wenli Wang

The North American Journal of Economics and Finance, 2024, vol. 74, issue C

Abstract: This manuscript addresses modeling mispricing risk of defined contribution pension plan (DCPP) with a mean–variance criterion to obtain the optimal investment strategy. Provides a way for the sustainability of pensions by investing in the financial market. The pension manager’s objective is to maximize the expected terminal wealth while simultaneously minimizing the associated risk. We employ the stochastic dynamic programming principle (SDPP) and the Lagrange dual theorem to derive the efficient frontier and strategy, then two special cases are examined. Last, we conduct a numerical analysis to show how different parameters influence the efficient frontier and strategy. This analysis sheds light on the economic implications of our findings.

Keywords: Mispricing; Mean–variance; Sustainability of pensions; Lagrange dual theorem (search for similar items in EconPapers)
JEL-codes: C61 G11 G23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:74:y:2024:i:c:s1062940824001621

DOI: 10.1016/j.najef.2024.102237

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