Mortality Risk and Real Optimal Asset Allocation for Pension Funds

Francesco Menoncin () and Olivier Scaillet

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: We analyze the problem of real optimal asset allocation for a pension fund maximising the expected CRRA utility of its real disposable wealth. The financial horizon of the analysis coincides with the random death time of a representative subscriber. We consider a very general setting where there exists a stochastic investment opportunity set together with stochastic contributions and pensions and we derive a quasi-explicit solution. When the market price of risk is independent of the state variables we are also able to compute a closed-form solution. Numerical simulations provide useful practical guidelines regarding the optimal investment strategy.

Keywords: pension fund; asset allocation; mortality risk; inflation risk (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2003-09
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-hea
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Citations: View citations in EconPapers (1)

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