Asset Allocation For Defined Contribution Pension Plan

With the aging of countries and the gradual improvement of financial markets,it is increasingly important to determine the status of defined contribution(DC)pension plans in the social security system.At the same time,the return of premiums clauses can guarantee the rights and interests of the insured members who die before retirement.The establishment and charge of pension management fees have important reference significance for the insured,the pension fund administrator or the policy maker of the social security system.Based on the above background,this paper studies the optimal investment strategy of DC pension plans with the return of premiums clauses under the administrative fees.We extends a part of the work of Luis(2016),assuming that pensions are invested in a risk-free asset and a risk asset,assuming that the risk asset price satisfies the CEV model.Pension managers aim to maximize the utility of each member's expected terminal wealth.In order to make our research more realistic,this paper adds the return of premiums clauses into the model to protect the rights and interests of the insured.On the one hand,considering the charge on balance,when the insured member has the CARA utility and the CRRA utility respectively,the optimal investment strategy of the DC pension plan with the return of premiums clauses is studied.On the other hand,considering the charge on flow,when the insured member has the CARA utility and the CRRA utility respectively,the optimal investment strategy of the DC pension with the return of premiums clauses is studied.Through the stochastic control theory,this paper gives the closed-form solutions of corresponding optimal investment strategies,and analyzes the impact of important parameters such as commissions and the return of premiums clauses on the optimal investment strategy in numerical analysis.Finally,the paper also studies the relationship between the two administrative charges and gives the economic explanation.