Presenter: Dr. Duy-Minh Dang, UQ

According to the Willis Towers Watson's Global Pension Assets Study 2016, about 85% of the pension plan assets under management in Australia are of the Defined Contribution type. This implies that retail investors are faced with managing investments over a truly long term period, about 50 years in total, consisting of roughly a 30 year accumulation  period followed by a 20 year decumulation phase. We discuss dynamic mean-variance asset allocation strategies for long term investors. We consider a portfolio consisting of a risk free bond and an equity index which follows a jump diffusion process. We derive the embedding result which converts the mean-variance objective into a form suitable for dynamic programming. We then discuss a numerical Hamilton-Jacobi-Bellman partial differential equation approach for solving the embedded mean-variance optimization problem under realistic constraints on the strategy. Extensive backtests show superiority of the multi-period mean variance strategy over the popular "glide path" strategy used by pension target date funds.

About Statistics, modelling and operations research seminars

Students, staff and visitors to UQ are welcome to attend our regular seminars.

The events are jointly run by our Operations research and Statistics and probability research groups, and colleagues in the Centre for Applications in Natural Resource Mathematics.

Seminars are held on Tuesdays from 11am to 12pm in Room 67-442 of the Priestley Building (Building 67).

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Plan to speak for up to 40 minutes, and allow up to 15 minutes for questions and discussion.

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Priestley Building (67)