Equilibrium investment strategies for a defined contribution pension plan with random risk aversion
研究了固定缴费养老金计划成员在随机风险偏好下的均衡投资策略，考虑了下行保护和随机通胀，发现使用预期风险厌恶而非随机风险厌恶会导致显著的福利损失。
This paper investigates equilibrium investment strategies for a defined contribution (DC) pension plan member who faces random risk preferences. Downside protection for the pension plan and stochastic inflation are considered. The pension plan member is allowed to invest in cash, in an inflation-index bond, and in a stock in the financial market. Besides financial market risks, the wealth of the pension account is influenced by the stochastic contribution of the pension plan member. We adopt the framework proposed in Desmettre and Steffensen (2023) to tackle the time inconsistency issues arising from the incorporation of random risk aversion. The problem is first transformed into a self-financing investment problem and the semi-closed form of the equilibrium investment strategies is derived under the power utility function up to the solution of an ordinary differential equation (ODE) system. Our numerical analysis reveals that using expected risk aversion rather than random risk aversion results in a substantial welfare loss for the pension plan member.