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Determining Equivalent Administrative Charges for Defined Contribution Pension Plans under CEV Model

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  • Hongjing Chen
  • Zheng Yin
  • Tianhao Xie

Abstract

In defined contribution pension plan, the determination of the equivalent administrative charges on balance and on flow is investigated if the risk asset follows a constant elasticity of variance (CEV) model. The maximum principle and the stochastic control theory are applied to derive the explicit solutions of the equivalent equation about the charges. Using the power utility function, our conclusion shows that the equivalent charge on balance is related to the charge on flow, risk-free interest rate, and the length of accumulation phase. Moreover, numerical analysis is presented to show our results.

Suggested Citation

  • Hongjing Chen & Zheng Yin & Tianhao Xie, 2018. "Determining Equivalent Administrative Charges for Defined Contribution Pension Plans under CEV Model," Mathematical Problems in Engineering, Hindawi, vol. 2018, pages 1-10, September.
    • Handle: RePEc:hin:jnlmpe:6278353
    DOI: 10.1155/2018/6278353
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