Optimal Investment Strategies of Target Benefit Pension Plans Under Linear Rational Wishart Mortality Risk

In this paper, we investigate the optimal investment strategy for a target-return pension plan under a Wishart model using stochastic optimal control methods. We consider the fact that mortality and interest rates are affected by a combination of systematic and idiosyncratic factors, which are modelled by a Wishart model with positive values. On this basis, we analyse the correlation between stochastic mortality and stochastic wage rates for plan members, as well as wage movements and financial market volatility. It is shown that financial market parameters and wage rates have a significant impact on the optimal investment strategy. We provide the optimal investment strategy and the optimal yield adjustment strategy for target-return pensions. This study provides a valuable reference for policy formulation and implementation of target-return pension plans in China.