A two-parameter family of pension contribution functions and stochastic optimization. (English) Zbl 0658.62124

O’Brien, Thomas

Insur. Math. Econ. 6, 129-134 (1987).

In ibid. 5, 141-146 (1986; Zbl 0587.62191), the author has suggested a linear function of A(t) (present value of future benefits) and F(t) (fund) as pension contribution function in place of the form given in C. L. Trowbridge [Trans. Soc. Actuaries 15, 151-169 (1963)] which is a one-parameter family of funding methods. Here we provide some theoretical justification for such a method by showing that, in the simplified model of this paper, the optimal solution of a stochastic control problem yields, as contribution function, an affine function of A(t) and F(t).

MSC:

62P05	Applications of statistics to actuarial sciences and financial mathematics
93E20	Optimal stochastic control

Keywords:

controlled diffusion processes; pension funding dynamics; one-parameter family of funding methods

Citations:

Zbl 0587.62191

References:

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