Optimal Investment of Defined Contribution Pension Based on Self-Protection and Minimum Security

Abstract

This paper mainly studies the optimal investment problem of defined contribution (DC) pension under the self-protection and minimum security. First, we apply [see formula in PDF] theorem to obtain the differential equation of the real stock price after discounting inflation. Then, under the constraint of external guarantee of DC pension terminal wealth, self-protection is introduced to study the maximization of the expected utility of terminal wealth at retirement time and any time before retirement. The explicit solution of the optimal investment strategy of DC pension at retirement time and any time before retirement should be derived by martingale method. Finally, the influence of self-protection on the optimal investment strategy of DC pension is numerically analyzed.