Optimal investment for a pension fund under inflation risk

Aihua Zhang () and Christian-Oliver Ewald

Mathematical Methods of Operations Research, 2010, vol. 71, issue 2, 353-369

Abstract: This paper investigates an optimal investment problem faced by a defined contribution (DC) pension fund manager under inflationary risk. It is assumed that a representative member of a DC pension plan contributes a fixed share of his salary to the pension fund during the finite time horizon [0, T]. The pension contributions are invested continuously in a risk-free bond, an index bond and a stock. The objective is to maximize the expected utility of terminal value of the pension fund. By solving this investment problem we present a way to deal with the optimization problem, in case there is a (positive) endowment (or contribution), using the martingale method. Copyright Springer-Verlag 2010

Keywords: Pension funds; Inflation; Optimal portfolios; Martingale method (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s00186-009-0294-5

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