Abstract: Replacement rate is one of the most important indicators to evaluate the investment effectiveness for occupational pension fund.The target fund linked with the replacement rate is constructed and the target-based optimal asset allocation model for occupational pension fund is established in this paper.Then,the optimal strategy is obtained by using stochastic dynamic programming.The optimal asset allocation strategy in different financial market and for different colony is investigated by using Monte Carlo simulation technique.Furthermore,sensitivity analysis for controllable parameters in the model is researched.The results show that the optimal asset allocation strategy is affected by the parameter in the model and the optimal asset allocation strategies for different colony in different financial market are different.Never theless,the weight of optimal allocation strategy to be invested into the high-risk asset decreases over time on all accounts.

Key words: optimal asset allocation strategy, occupational pension, replacement ratio, target fund, cost function