Optimal Investment Strategy For DC Pension Plan Under The Hybrid Stochastic Volatility Model

With the rapid growth of aging population,the pressure of pension payment increases sharply.It is a common way to maintain and increase the value of pension through investment.A large number of empirical studies have shown that some uncertain factors(such as interest rate risk,volatility risk,etc.)will have a huge impact on investors’ returns in real financial markets.Therefore,it is of great theoretical and practical significance to study the optimal investment strategy for pension plan under stochastic interest rate and stochastic volatility.This paper first studies the optimal investment strategy for DC pension plan with interest rate risk and volatility risk.Assumed that the financial market consists of a risk-free asset and a stock,where the price process of the stock follows the hybrid Heston-Hull-White model.Moreover,the salary of pension plan members is stochastic.Based on maximizing the expected utility of terminal wealth,the corresponding HJB equation is established,and the optimal investment strategy is obtained under the CARA utility function and the CRRA utility function,respectively.Numerical examples are given to characterize the effects of financial parameters on the optimal investment strategy.On that basis,we introduce inflation risk and investigate an optimal investment strategy for DC pension plan under hybrid Heston-Hull-White model,taking account of the inflation risk and the stochastic salary.The fund wealth is invested in financial market consisting of a risk-free asset,an inflation-indexed bond and a stock.The goal of the pension fund manager is to maximize the expected utility of the terminal real wealth.We derive the HJB equation through the dynamic programming principle,under the CRRA utility function,the optimal investment strategy is obtained.Finally,a numerical example is presented to characterize the impacts of financial parameters on the optimal investment strategy.