Optimal Control of Background-Based Uncertain Systems with Applications in DC Pension Plan.

ABSTRACT

In this paper, we propose a new optimal control model for uncertain systems with jump. In the model, the background-state variables are incorporated, where the background-state variables are governed by an uncertain differential equation. Meanwhile, the state variables are governed by another uncertain differential equation with jump, in which both the background-state variables and the control variables are involved. Under the optimistic value criterion, using uncertain dynamic programming method, we establish the principle and the equation of optimality. As an application, the optimal investment strategy and optimal payment rate for DC pension plans are given, where the corresponding background-state variables represent the salary process. This application in DC pension plans illustrates the effectiveness of the proposed model.