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On Efficiency of MeanVariance based Portfolio Selection in DC Pension Schemes. Collegio Carlo Alberto
, 2010
"... www.carloalberto.org/working_papers © 2010 by Elena Vigna. Any opinions expressed here are those of the authors and not those of theCollegio Carlo Alberto. On efficiency of meanvariance based portfolio selection in DC pension schemes ..."
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www.carloalberto.org/working_papers © 2010 by Elena Vigna. Any opinions expressed here are those of the authors and not those of theCollegio Carlo Alberto. On efficiency of meanvariance based portfolio selection in DC pension schemes
Unified Framework of MeanField Formulations for Optimal Multiperiod MeanVariance Portfolio Selection
, 2014
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Utility portfolio optimization with liability and multiple risky assets under the extended CIR model
"... Abstract: This paper studies an asset and liability management problem with extended CoxIngersollRoss (CIR) interest rate, where the financial market is composed of one riskfree asset and multiple risky assets and one zerocoupon bond. We assume that riskfree interest rate is driven by extended ..."
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Abstract: This paper studies an asset and liability management problem with extended CoxIngersollRoss (CIR) interest rate, where the financial market is composed of one riskfree asset and multiple risky assets and one zerocoupon bond. We assume that riskfree interest rate is driven by extended CIR interest rate model, while liability is modeled by Brownian motion with drift and is generally correlated with stock price. Firstly, we use stochastic optimal control theory to obtain HamiltonJacobiBellman (HJB) equation for the value function and choose power utility and exponential utility for our analysis. Secondly, we obtain the closedform solutions to the optimal investment strategies by applying variable change technique. Finally, a numerical example is presented to analyze the dynamic behavior of the optimal investment strategy and provide some economic implications for our results.
ContinuousTime MeanVariance AssetLiability Management with Hidden Markovian Regime Switching
"... This paper considers a continuoustime meanvariance assetliability management problem with incompletely observable information. An investor can only observe the prices of the asset and liability and the dynamics of the unobservable states of the underlying financial market is described by a hidde ..."
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This paper considers a continuoustime meanvariance assetliability management problem with incompletely observable information. An investor can only observe the prices of the asset and liability and the dynamics of the unobservable states of the underlying financial market is described by a hidden Markovian chain. The price of the risky asset is assumed to be governed by a hidden Markovian regime switching geometric Brownian motion and the liability is assumed to follow a hidden Markovian regime switching Brownian motion with drift, respectively. The appreciation rates of the risky asset and the liability are modulated by the hidden Markovian chain. By using the separation principle, the filteringestimation problem and the meanvariance assetliability management problem are discussed. The explicit expressions for the optimal assetliability management strategy and the meanvariance efficient frontier are determined by using the stochastic maximum principle.
RISK MEASUREMENT, MANAGEMENT AND OPTION PRICING VIA A NEW LOGNORMAL SUM APPROXIMATION METHOD
, 2012
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MeanVariance Portfolio Selection with Inflation Hedging Strategy: a Case of a Defined Contributory Pension Scheme
"... In this paper, we consider a meanvariance portfolio selection problem with inflation hedging strategy for a defined contributory pension scheme. We establish the optimal wealth which involves a cash account and two risky assets for the pension plan member (PPM). The efficient frontier is obtained f ..."
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In this paper, we consider a meanvariance portfolio selection problem with inflation hedging strategy for a defined contributory pension scheme. We establish the optimal wealth which involves a cash account and two risky assets for the pension plan member (PPM). The efficient frontier is obtained for the three asset classes which gives the PPM the opportunity to decide his or her own risk and wealth. It was found that inflationlinked bond is a suitable asset for hedging inflation risks in an investment portfolio.
Markowitz’s meanvariancen DC pension funds management under inflation: A continuoustime modelI
"... In defined contribution pension schemes, the financial risk borne by the member occurs during the accumulation phase. To build up sufficient funds for retirement, scheme members invest their wealth in a portfolio of assets. This paper considers an optimal investment problem of a scheme member facin ..."
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In defined contribution pension schemes, the financial risk borne by the member occurs during the accumulation phase. To build up sufficient funds for retirement, scheme members invest their wealth in a portfolio of assets. This paper considers an optimal investment problem of a scheme member facing stochastic inflation under the Markowitz meanvariance criteria. Besides, we consider a more general market with multiple assets that can all be risky. By applying the Lagrange method and the stochastic dynamic programming techniques, we derive the associated HamiltonJacobiBellman (HJB) equation which can be converted into six correlated but relatively simple partial differential equations (PDEs). The explicit solutions for these six PDEs are derived by using the homogenization approach and the variable transformation technique. Then the closed form expressions for the optimal strategy and the efficient frontier can be obtained through the Lagrange dual theory. In addition, we illustrate the results by some numerical examples.
MeanVariance AssetLiability Management with StateDependent Risk Aversion
, 2014
"... In this paper, we consider the assetliability management under the meanvariance criterion. The financial market consists of a riskfree bond and a stock whose price process is modeled by a geometric Brownian motion. The liability of the investor is uncontrollable and is modeled by another geometri ..."
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In this paper, we consider the assetliability management under the meanvariance criterion. The financial market consists of a riskfree bond and a stock whose price process is modeled by a geometric Brownian motion. The liability of the investor is uncontrollable and is modeled by another geometric Brownian motion. We consider a specific statedependent risk aversion which depends on a power function of the liability. By solving a flow of FBSDEs with bivariate state process, we obtain the equilibrium strategy among all the openloop controls for this timeinconsistent control problem. It shows that the equilibrium strategy is a feedback control of the liability.
Research Article MeanVariance Portfolio Selection for DefinedContribution Pension Funds with Stochastic Salary
"... which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. This paper focuses on a continuoustime dynamic meanvariance portfolio selection problem of definedcontribution pension funds with stochastic salary, whose risk comes from bo ..."
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which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. This paper focuses on a continuoustime dynamic meanvariance portfolio selection problem of definedcontribution pension funds with stochastic salary, whose risk comes from both financial market and nonfinancial market. By constructing a special Riccati equation as a continuous (actually a viscosity) solution to the HJB equation, we obtain an explicit closed form solution for the optimal investment portfolio as well as the efficient frontier. 1.
econometrics, optimal asset portfolio allocation, Bayesian inference and Bayesian model choice, time series modeling and analysis.
"... Assetliability management for pension funds in a timevarying volatility environment ..."
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Assetliability management for pension funds in a timevarying volatility environment