OPTIMAL ASSET ALLOCATION FOR POOLED ANNUITY UNDER AMBIGUITY AVERSION AND PARTIAL INFORMATION

This study delves into optimal consumption and asset allocation strategies dilemma associated with pooled annuities, considering partial information and ambiguity aversion. We posit that drift term in the stock market, along with the probability distributions of both death and withdrawal times, are unobservable. Unlike conventional models where pooled annuity members have fixed withdrawal times, our approach allows members to exit at any point, affecting fund distribution. Upon a member’s death or withdrawal, a certain percentage of the funds can be allocated to either the member or a beneficiary. Moreover, the study utilizes advanced mathematical frameworks, including probabilistic control techniques, equivalent measure changes, and partial differential equation-based optimization, to establish effective investment strategies. Illustrative examples highlight how sensitivity to uncertainty influences strategic investment decisions and consumption patterns.