Optimal investment and Pension policy in Pay-As-You-Go systems under forward utility and ageing population
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arXiv
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| Autori principali: | , , , |
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| Natura: | Preprint |
| Pubblicazione: |
2026
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| _version_ | 1866911683141697536 |
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| author | Alonso-Garcia, Jennifer Hillairet, Caroline Kaakai, Sarah Mrad, Mohamed |
| author_facet | Alonso-Garcia, Jennifer Hillairet, Caroline Kaakai, Sarah Mrad, Mohamed |
| contents | This paper investigates optimal investment and pension policies in a Pay-As-You-Go (PAYG) system supplemented by a buffer fund used as an intergenerational risk-sharing mechanism. The social planner's preference criterion is represented by non-zero volatility forward Constant Relative Risk Aversion (CRRA) utilities, and explicitly accounts for both sustainability and adequacy constraints. The optimal policies are characterized in closed form, and an in-depth analysis of the impact of preference sensitivities on the pension scheme is conducted. A detailed numerical analysis is performed to evaluate the sustainability and benefit adequacy of this hybrid PAYG buffer fund arrangement under a range of demographic, financial, and macroeconomic scenarios. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_12698 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Optimal investment and Pension policy in Pay-As-You-Go systems under forward utility and ageing population Alonso-Garcia, Jennifer Hillairet, Caroline Kaakai, Sarah Mrad, Mohamed Mathematical Finance Optimization and Control Probability This paper investigates optimal investment and pension policies in a Pay-As-You-Go (PAYG) system supplemented by a buffer fund used as an intergenerational risk-sharing mechanism. The social planner's preference criterion is represented by non-zero volatility forward Constant Relative Risk Aversion (CRRA) utilities, and explicitly accounts for both sustainability and adequacy constraints. The optimal policies are characterized in closed form, and an in-depth analysis of the impact of preference sensitivities on the pension scheme is conducted. A detailed numerical analysis is performed to evaluate the sustainability and benefit adequacy of this hybrid PAYG buffer fund arrangement under a range of demographic, financial, and macroeconomic scenarios. |
| title | Optimal investment and Pension policy in Pay-As-You-Go systems under forward utility and ageing population |
| topic | Mathematical Finance Optimization and Control Probability |
| url | https://arxiv.org/abs/2605.12698 |