  This work deals with an optimal asset allocation problem for a defined
contribution (DC) pension plan during its accumulation phase. The contribution
rate is proportional to the individual's salary, the dynamics of which follows
a Heston stochastic volatility model with jumps, and there are common shocks
between the salary and the volatility. Since the time horizon of pension
management might be long, the influence of inflation is considered in the
context. The inflation index is subjected to a Poisson jump and a Brownian
uncertainty. The pension plan aims to reduce fluctuations of terminal wealth by
investing the fund in a financial market consisting of a riskless asset and a
risky asset. The dynamics of the risky asset is given by a jump diffusion
process. The closed form of investment decision is derived by the dynamic
programming approach.
