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Manage Pension Deficit with Heterogeneous Insurance

Author

Listed:
  • De-Lei Sheng

    (Shanxi University of Finance and Economics
    Shanxi University of Finance and Economics)

  • Linfeng Shi

    (Shanxi University of Finance and Economics)

  • Danping Li

    (East China Normal University)

  • Yanping Zhao

    (Shanxi University of Finance and Economics)

Abstract

This paper considers a positive and increasing pension deficit of a certain pay-as-you-go (PAYG) pension system, and tries to make up for this deficit by using heterogeneous insurance. The positive pension deficit is formulated as a mathematical function in continuous time. The surplus of an appropriate heterogeneous insurance is described by diffusion approximation of a Cramér-Lundberg process. The system of extended Hamilton-Jacobi-Bellman equations under mean-variance criterion is established. The closed-form solution and optimal surplus-multiplier of heterogenous insurance are obtained. Some interpretations further explain the theoretical values of the results.

Suggested Citation

  • De-Lei Sheng & Linfeng Shi & Danping Li & Yanping Zhao, 2022. "Manage Pension Deficit with Heterogeneous Insurance," Methodology and Computing in Applied Probability, Springer, vol. 24(2), pages 1119-1141, June.
    • Handle: RePEc:spr:metcap:v:24:y:2022:i:2:d:10.1007_s11009-022-09960-3
    DOI: 10.1007/s11009-022-09960-3
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    References listed on IDEAS

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