Symmetry-based optimal portfolio for a DC pension plan under a CEV model with power utility

2021 ◽  
Author(s):  
Xuelin Yong ◽  
Xiaoqian Sun ◽  
Jianwei Gao
Keyword(s):  
Pension Plan ◽  
Optimal Portfolio ◽  
Power Utility ◽  
Cev Model

scholarly journals Determining Equivalent Administrative Charges for Defined Contribution Pension Plans under CEV Model

2018 ◽  
Vol 2018 ◽  
pp. 1-10
Author(s):  
Hongjing Chen ◽  
Zheng Yin ◽  
Tianhao Xie
Keyword(s):  
Pension Plan ◽  
Pension Plans ◽  
Defined Contribution ◽  
Power Utility ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
The Maximum Principle ◽  
Equivalent Equation ◽  
Defined Contribution Pension Plan

In defined contribution pension plan, the determination of the equivalent administrative charges on balance and on flow is investigated if the risk asset follows a constant elasticity of variance (CEV) model. The maximum principle and the stochastic control theory are applied to derive the explicit solutions of the equivalent equation about the charges. Using the power utility function, our conclusion shows that the equivalent charge on balance is related to the charge on flow, risk-free interest rate, and the length of accumulation phase. Moreover, numerical analysis is presented to show our results.

scholarly journals Optimal Investment and Consumption Decisions under the Constant Elasticity of Variance Model

2013 ◽  
Vol 2013 ◽  
pp. 1-11 ◽  
Author(s):  
Hao Chang ◽  
Xi-min Rong ◽  
Hui Zhao ◽  
Chu-bing Zhang
Keyword(s):  
Stock Price ◽  
Optimal Investment ◽  
Dynamic Programming Principle ◽  
Power Utility ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Consumption Decisions ◽  
Optimal Investment And Consumption ◽  
Consumption Strategies

We consider an investment and consumption problem under the constant elasticity of variance (CEV) model, which is an extension of the original Merton’s problem. In the proposed model, stock price dynamics is assumed to follow a CEV model and our goal is to maximize the expected discounted utility of consumption and terminal wealth. Firstly, we apply dynamic programming principle to obtain the Hamilton-Jacobi-Bellman (HJB) equation for the value function. Secondly, we choose power utility and logarithm utility for our analysis and apply variable change technique to obtain the closed-form solutions to the optimal investment and consumption strategies. Finally, we provide a numerical example to illustrate the effect of market parameters on the optimal investment and consumption strategies.

scholarly journals Portfolio Strategy for an Investor with Logarithm Utility and Stochastic Interest Rate under Constant Elasticity of Variance Model

2020 ◽  
pp. 186-196
Author(s):  
Edikan E. Akpanibah ◽  
Udeme Ini
Keyword(s):  
Interest Rate ◽  
Optimal Portfolio ◽  
Risky Asset ◽  
Stochastic Interest Rate ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Portfolio Strategy ◽  
Expansion Technique ◽  
Stochastic Interest

This paper is aim at maximizing the expected utility of an investor’s terminal wealth; to achieve this, we study the optimal portfolio strategy for an investor with logarithm utility function under constant elasticity of variance (CEV) model in the presence of stochastic interest rate. A portfolio comprising of one risk free asset and one risky asset is considered where the risk free interest rate follows the Cox- Ingersoll-Ross (CIR) model and the risky asset is modelled by CEV. Using power transformation, change of Variable and asymptotic expansion technique, an explicit solution of the optimal portfolio strategy and the Value function is obtained. Furthermore, numerical simulations are presented to study the effect of some parameters on the optimal portfolio strategy under stochastic interest rate.

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