The defined contribution pension plan after retirement under the criterion of a revised loss considering the economic situation

Abstract

Considering the economic situation, we investigate the optimal asset allocation of defined contribution pension funds with random payouts after retirement under a modified criterion of quadratic loss. The HJB equation is derived adhering to the dynamic programming principle, and the time-consistent optimal investment strategy is designed based on the calculus theory. Finally, under two different risk attitudes, namely surplus preference and risk aversion, the impact of key parameters on the optimal investment strategy and the function of minimum loss at the initial moment is compared and analyzed, the economic significance is demonstrated, and the rationality of the model is verified.

Keywords

• criterion of modified quadratic loss
• penalty coefficient
• risk investment
• value function
• hjb equation
• time-consistent investment strategy