DYNAMIC SIMULTANEOUS MANAGEMENT OF PENSION ANNUITY PAYMENTS AND ASSET ALLOCATION STRATEGY (AN ASSET-LIABILITY MODEL WITHIN A STOCHASTIC FRAMEWORK)

The paper considers a defined-contribution pension plan and focuses to the post-retirement period, exploring the main problem of the dynamic simultaneous management of the asset allocation strategy and the pension payment rate under two potential models. Firstly, we assume a fixed payment period T with a final residual payment at the end of the period and secondly assume a variable payment period tau where the payments continue till the fund drops below zero. Under both of the two models, the fund manager has two investment options: a risky and a safe one. The two ultimate solutions coincide and actually the mathematical formulae for the second model may be derived as a limiting case when T goes to infinity for certain terms of the formulae of the first model.