DETERMINISTIC INVESTMENT STRATEGY IN A DC PENSION PLAN WITH INFLATION RISK UNDER MEAN-VARIANCE CRITERION

This paper studies an optimal deterministic investment problem for a DC pension plan member with inflation risk. We describe the price processes of the inflation-indexed bond and the stock by a continuous diffusion process and a jump diffusion process with random parameters, respectively. The contribution rate linked to the income of the DC plan member is assumed to be a non-Markovian adapted process. Under the mean-variance criterion, we use Malliavin calculus to derive a characterization for the optimal deterministic investment strategy. In some special cases, we obtain the explicit expressions for the optimal deterministic strategies.

On Application of Matlab on Efficient Portfolio Management for a Pension Plan in the Presence of Uneven Distributions of Accumulated Wealth

In this paper, we solved the problem encountered by a pension plan member whose portfolio is made up of one risk free asset and three risky assets for the optimal investment plan with return clause and uneven distributions of the remaining accumulated wealth. Using mean variance utility function as our objective function, we formulate our problem as a continuous-time mean–variance stochastic optimal control problem. Next, we used the variational inequalities methods to transform our problem into Markovian time inconsistent stochastic control, to determine the optimal investment plan and the efficient frontier of the plan member. Using mat lab software, we obtain numerical simulations of the optimal investment plan with respect to time and compare our results with an existing result.

On the Effect of Inflation and Impact of Hedging on Pension Wealth Generation Strategies under the Geometric Brownian Motion Model

This work investigates the effect of Inflation and the impact of hedging on the optimal investment strategies for a prospective investor in a DC pension scheme, using inflation-indexed bond and inflation-linked stock. The model used here permits the plan member to make a defined contribution, as provided in the Nigerian Pension Reform Act of 2004. The pension plan member is allowed to invest in risk-free asset (cash), and two risky assets (i.e., the inflation-indexed bond and inflation-linked stock). A stochastic differential equation of the pension wealth that takes into account certain agreed proportions of the plan member’s salary, paid as contribution towards the pension fund, is constructed and presented. The Hamilton-Jacobi-Bellman (H-J-B) equation, Legendre transformation, and dual theory are used to obtain the explicit solution of the optimal investment strategies for CRRA utility function. Our investigation reveals that the inflation have significant negative effect on wealth investment strategies, particularly, the RRA(w) is not constant with the investment strategy, since the inflation parameters and coefficient of CRRA utility function have insignificant input on the investment strategies, and also the inflation-indexed bond and inflation-linked stock has a positive damping effect (hedging) on the severe effect of inflation.

An Evaluation of Lifestyle Health Coaching Programs Using Trained Health Coaches and Evidence-Based Curricula at 6 Months Over 6 Years

Purpose: Describe health plan member-level participation, completion, and 6-month outcomes for 5 lifestyle health coaching programs offered by an integrated delivery and financing system (IDFS) over 6 years. Design: Case series study of 5 lifestyle programs with 180-day follow-up. Setting: Large Western PA integrated delivery and financing system (IDFS) deployed multiple coaching modalities for diverse insurance-member enrolled population. Participants: A total of 14 591 health plan members choosing a lifestyle health coaching program. Intervention: Evidence- and curriculum-based lifestyle health coaching programs delivered by 1 of 4 interactive modalities. Measures: A single metric was used as an overall indicator of clinical success for each program. Success measures include a ≥5% reduction of self-reported baseline weight, meeting physical activity guidelines, and 7-day point prevalence abstinence from tobacco. For stress and nutrition, where no single target measure exists, a metric was created that represented a net improvement across all key outcomes measured. Analysis: The proportion of members meeting target outcomes were calculated and described across all time points and modalities. Results: At 180 days, 77% of enrolled members reported reduced stress, 7% quit tobacco, 50.5% met physical activity guidelines, 65.2% improved nutrition, and 44.2% lost 5% or more of baseline weight. Conclusion: This evaluation describes the real-world effectiveness of evidence- and curriculum-based lifestyle improvement programs delivered by trained health coaches to a diverse health plan member population.

Designing successful post-retirement solutions by blending growth, income and protection

The move from defined benefit to defined contribution (DC) has transferred the longevity and investment risks from the plan sponsor to the individual plan member. Without the actuarial cross-subsidies implied by pooling these risks, the danger of outliving one’s savings is significant. Much attention has been focussed on pre-retirement investment design but less on post-retirement. In most countries, the post-retirement systems in place are insufficient to solve this challenge for small asset sizes or small proportions of individuals’ retirement accounts. However, a number of DC markets are mature, such as Australia and Chile, and the principles of a solution that works for all must be identified. This paper researches a number of post-retirement systems around the world and identifies ten key factors that contribute to post-retirement solution design. These factors can result in an inconsistency between countries regarding the most appropriate post-retirement solution. Additionally, a disconnect is apparent between what retirees need and want in post-retirement. Successful post-retirement solutions will inevitably blend investment and insurance components in a balanced manner. With lengthening life expectancies, research supports strategies that blend a growth and income account-based approach for the first 15–20 years after retirement with longevity protection in later life.

Equilibrium Investment Strategy for DC Pension Plan with Inflation and Stochastic Income under Heston’s SV Model

We consider a portfolio selection problem for a defined contribution (DC) pension plan under the mean-variance criteria. We take into account the inflation risk and assume that the salary income process of the pension plan member is stochastic. Furthermore, the financial market consists of a risk-free asset, an inflation-linked bond, and a risky asset with Heston’s stochastic volatility (SV). Under the framework of game theory, we derive two extended Hamilton-Jacobi-Bellman (HJB) equations systems and give the corresponding verification theorems in both the periods of accumulation and distribution of the DC pension plan. The explicit expressions of the equilibrium investment strategies, corresponding equilibrium value functions, and the efficient frontiers are also obtained. Finally, some numerical simulations and sensitivity analysis are presented to verify our theoretical results.