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Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases

Battocchio Paolo, Francesco Menoncin () and Olivier Scaillet ()
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Battocchio Paolo: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 2003004, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

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 bot 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 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 funds; mortality risk; asset allocation (search for similar items in EconPapers)
JEL-codes: G23 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-rmg
Date: 2003-02-01
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Related works:
Journal Article: Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases (2007) Downloads
Working Paper: Optimal asset allocation for pension funds under mortality risk during the accumulation and decumulation phases (2003) Downloads
Working Paper: Optimal asset allocation for pension funds under mortality risk during the accumulation and ecumulation phases (2003) Downloads
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