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Management of Pension Funds When Asset Returns are Driven by Lévy Processes
Social Science Research Network
In this paper, we address portfolio optimisation when stock prices follow general Lévy processes in the context of a pension accumulation scheme. The optimal portfolio weights are obtained in quasi-closed form and the optimal consumption in closed form. To solve the optimisation problem, we show how to switch back and forth between the stochastic differential and standard exponentials of the Lévy processes. We apply this procedure to both the Variance Gamma process and a Lévy process whosedoi:10.2139/ssrn.2083655 fatcat:serftf3ibzd6lkanj4gmupoacq