Mean-Variance Portfolio Selection for Defined-Contribution Pension Funds with Stochastic Salary

Abstract EN

This paper focuses on a continuous-time dynamic mean-variance portfolio selection problem of defined-contribution pension funds with stochastic salary, whose risk comes from both financial market and nonfinancial market.

By constructing a special Riccati equation as a continuous (actually a viscosity) solution to the HJB equation, we obtain an explicit closed form solution for the optimal investment portfolio as well as the efficient frontier.