Optimal investment of DC pension plan under short-selling constraints and portfolio insurance

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Title: Optimal investment of DC pension plan under short-selling constraints and portfolio insurance
Authors: Dong, Y
Zheng, H
Item Type: Journal Article
Abstract: In this paper we investigate an optimal investment problem under short-selling and portfolio insurance constraints faced by a defined contribution pension fund manager who is loss averse. The financial market consists of a cash bond, an indexed bond and a stock. The manager aims to maximize the expected S-shaped utility of the terminal wealth exceeding a minimum guarantee. We apply the dual control method to solve the problem and derive the representations of the optimal wealth process and trading strategies in terms of the dual controlled process and the dual value function. We also perform some numerical tests and show how the S-shaped utility, the short-selling constraints and the portfolio insurance impact the optimal terminal wealth.
Issue Date: 1-Mar-2019
Date of Acceptance: 19-Dec-2018
URI: http://hdl.handle.net/10044/1/66843
DOI: https://dx.doi.org/10.1016/j.insmatheco.2018.12.005
ISSN: 0167-6687
Publisher: Elsevier
Start Page: 47
End Page: 59
Journal / Book Title: Insurance: Mathematics and Economics
Volume: 85
Copyright Statement: © 2018 Elsevier B.V. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence http://creativecommons.org/licenses/by-nc-nd/4.0/
Keywords: 01 Mathematical Sciences
14 Economics
15 Commerce, Management, Tourism And Services
Statistics & Probability
Publication Status: Published
Embargo Date: 2020-07-04
Online Publication Date: 2019-01-04
Appears in Collections:Financial Mathematics
Faculty of Natural Sciences

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