Nash Equilibrium Strategy for a DC Pension Plan with State-Dependent Risk Aversion: A Multiperiod Mean-Variance Framework. (17th October 2018)

• Record Type: Journal Article
• Authors: Wang, Liyuan; Chen, Zhiping
• Other Names: Peris Alfred Academic Editor.
• Is Part Of: Discrete dynamics in nature and society. Volume 2018(2018)
• Publication Date: 2018-10-17
• Subjects: System analysis -- Periodicals; Dynamics -- Periodicals; Chaotic behavior in systems -- Periodicals; Differentiable dynamical systems -- Periodicals; 003.05
• DOI: 10.1155/2018/7581231
• Languages: English
• ISSNs: 1026-0226

Abstract

Abstract : This paper investigates a defined contribution (DC) pension plan investment problem during the accumulation phase under the multiperiod mean-variance criterion. Different from most studies in the literature, where the investor's risk aversion attitude is state-independent, we choose a state-dependent risk aversion parameter, which is a fractional function of the current wealth level. Moreover, we incorporate the wage income factor into our model, which leads to a more complicated problem than the portfolio selection problems that appeared in relevant papers. Due to the time inconsistency of the resulting problem, we derive the explicit expressions for the equilibrium strategy and the corresponding equilibrium value function by adopting the game theoretic framework and using the extended Bellman equation. Further, two special cases are discussed. Finally, based on real data from the American market, some prominent features of the equilibrium strategy established in our theoretical derivations are provided by comparing them with the results in the existing literature.