Optimal Investment Strategies Of A Defined Contribution Pension Fund

ABSTRACT

The issue that a pension fund manager faces is how to optimize his or her investment

strategies. The question we resolved is the optimal design of the minimum guarantee

in a defined contribution pension Fund Scheme. We study the optimal asset allocation

strategy a given fund manager can adopt to maximize surplus (the difference between the

total wealth and the Guarantee) and the payback ratio (ratio between total wealth and

Guarantee). Finally, We analyze the impact of the main parameter which is the sharing

rule between the contributor and the pension fund. The sharing rule is a way to creating a

continuum between two extreme pension funding methods that are Defined Contribution

and Defined Benefit pension fund, and the sharing rule allows partial risk transfer between

the pension fund contributors and the pension fund manager. we consider a case of a

pension fund company which invests in a bond, stocks and a capital market account. The

uncertainty in the financial market is driven by Brownian motions. Numerical simulations

have been performed to compare the different models.