JOURNAL OF SHANDONG UNIVERSITY(NATURAL SCIENCE) ›› 2025, Vol. 60 ›› Issue (3): 49-59.doi: 10.6040/j.issn.1671-9352.0.2023.436

• Financial Mathematics • Previous Articles     Next Articles

Optimal investment and benefit payment adjustment strategy for target benefit pension plan under 4/2 stochastic volatility model

HAN Jingyi, CHANG Hao*, CHEN Zhen   

  1. School of Mathematical Sciences, Tiangong University, Tianjin 300387, China
  • Published:2025-03-10

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Abstract: The target benefit pension(TBP)plan under 4/2 stochastic volatility model contains both the active members and the retired members, where the active members pay predetermined contributions to the pension fund and the retired members receive a corresponding pension from the fund, and the benefit payment level of the retired members depends on the investment situation. It is assumed that the pension fund can be invested in a risk-free asset and a stock, and the stock price follows the 4/2 stochastic volatility model. Applying the stochastic optimal control theory, explicit solutions for the optimal investment and benefit payment adjustment strategy are derived, and a numerical example is given to illustrate the results obtained. Methodological and theoretical support for solving other complex investment problems in a stochastic volatility environment, and the reference basis for asset allocation and risk management of fund managers are provided.

Key words: target benefit pension plan, 4/2 stochastic volatility model, deviation-type objective function, stochastic optimal control theory

CLC Number: 

  • O211.67
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