Paper optimizes DC pension fund management with VaR and relative performance constraints.
problem Optimizing DC pension fund performance under VaR and relative performance constraints.
method Introduced an auxiliary process to transform the problem into a self-financing problem, combined linearization, Lagrange dual, martingale, and concavification methods.
result Explicit investment strategies obtained for certain penalty and reward functions.
In this paper we consider three types of embedded options in pension benefit design. The first is the Florida second election (FSE) option, offered to public employees in the state of Florida in 2002. Employees were given the option to convert from a defined contribution (DC) plan to a defined benefit (DB) plan at a ti…
In this article we solve the problem of maximizing the expected utility of future consumption and terminal wealth to determine the optimal pension or life-cycle fund strategy for a cohort of pension fund investors. The setup is strongly related to a DC pension plan where additionally (individual) consumption is taken i…
This paper optimizes DC pension plan investments using O-U process and loan.
problem Optimizing investment strategy for DC pension plans under specific market conditions.
method Dynamic programming and Hamilton-Jacobi-Bellman equation to derive optimal investment strategy.
result Explicit expression for optimal investment strategy derived.
Investigates risk measures for DC pension decumulation.
problem Develop optimal decumulation strategies for DC plan holders.
method Formulates decumulation as a control problem, studies risk measures (expected shortfall, linear shortfall, probability of shortfall).
result Optimal controls for expected reward and expected shortfall are identical to those for expected reward and linear shortfall.
The paper proposes a dynamic risk measure approach for evaluating defined-contribution pension funds.
problem Periodic evaluation of defined-contribution pension funds to manage risk and improve projections.
method Dynamic risk measure criterion, model-free reinforcement learning, Lee-Carter mortality model.
result Periodic evaluations lead to more risk-averse strategies, while mortality improvements encourage risk-seeking behaviors.
Investment strategy for DC pension plan with inflation risk and tail VaR constraint.
problem Maximizing terminal wealth for pension member with tail VaR constraint.
method Lagrange method and quantile optimization techniques.
result Optimal investment strategy and output in closed-form derived.
Georgia's pension reform affects individual welfare.
problem Optimizing pension systems to ensure old age welfare and reduce budgetary pressure.
method Historical analysis, comparative international experience, and assessment of investment potential.
result Challenges and potential improvements of the mandatory funded pension system.
The study uses ML and AI to forecast pension fund mortality, outperforming traditional methods.
problem Incorporating longevity risk into pension fund financial assessments.
method Employed actuarial learning with ML/AI techniques (regression trees, random forest, boosting, XGBoost, CatBoost, neural networks) on actuarial data.
result ML/AI algorithms outperform the Lee-Carter model in mortality forecasting for pension funds.
Proposes a mixed pension system combining PAYG and funded contributions to address sustainability.
problem Sustainability of public pension systems due to declining birth rates and increasing life expectancy.
method Combines a classical PAYG scheme with a funded investment scheme to ensure financial sustainability.
result Individuals contribute to a funded part, making them active participants in addressing demographic risks.
This review examines TDFs in Chile's pension reform, recommending dynamic glide paths and diversified benchmarks.
problem Chile's pension system needs to adapt to modern investment strategies.
method Comprehensive review of TDFs, highlighting challenges and opportunities for Chilean regulators and fund managers.
result Dynamic glide paths and diversified benchmarks are recommended for better retirement outcomes.
Adaptive strategies reduce pension fund costs and risks.
problem Managing longevity and volatility risks in pension funds.
method Modular simulation framework with customizable metrics.
result Substantial reduction in pension plan costs and default risk.
Optimizes pension fund management under funding risks.
problem Managing DB pension fund under underfunded and overfunded conditions.
method Stochastic model with Ornstein-Uhlenbeck interest rate, geometric Brownian motion for benefits, and cash, bond, stock investments.
result Optimal wealth process, portfolio, and efficient frontier obtained under various tolerance levels for solvency risk.
This research presents an analysis of the demographic risk related to future membership patterns in pension funds with restricted entrance, financed under a pay-as-you-go scheme. The paper, therefore, proposes a stochastic model for investigating the behaviour of the demographic variable "new entrants" and the influenc…
Two pension funds mutually insure against longevity risk.
problem Mutual insurance against systematic longevity risk for pension funds.
method Mathematical demonstration and market clearing condition.
result Insurance provides little benefit when fund preferences are similar, but can be beneficial when preferences vary significantly.
This paper compares different DRO formulations for pension fund management.
problem Navigating uncertainty in asset liability management for pension funds.
method Three DRO formulations: mixture, box, and Wasserstein ambiguity sets.
result Wasserstein and box ambiguity sets outperform traditional approaches in fund performance.
A stochastic model helps maintain insufficiently funded pension funds.
problem Maintaining pension funds that are underfunded and require external financing.
method A time-homogeneous diffusion process with a barrier is used to model the unrestricted reserves value, and a renewal-reward process models the financing effort.
result Expected values and cost evaluations of maintenance are derived, and the approach is applied to a generalized Brownian motion process.
This paper discusses the financial risks faced by the UK Pension Protection Fund (PPF) and what, if anything, it can do about them. It draws lessons from the regulatory regimes under which other financial institutions, such as banks and insurance companies, operate and asks why pension funds are treated differently. It…
Optimal investment strategy for a large, identical investor or pension fund.
problem Finding the best investment strategy for a large group of identical investors.
method Developed a numerical algorithm and derived an analytic formula for optimal consumption.
result Proved the model's validity for both large and small groups of investors.
New pension design reduces volatility without guarantees.
problem Pension volatility and guarantees issues.
method Split premium, invest in funds, redistribute to smooth volatility.
result Maximizes total accumulated capital at retirement.
Researchers analyze optimal investment strategies for a collectivised pension fund with identical investors.
problem Optimizing investment strategies for a collectivised pension fund with identical investors.
method Analytical computation of optimal investment-consumption strategies for a fund of n identical investors with Epstein-Zin preferences.
result Constant consumption strategy is suboptimal for infinite collectives, suggesting annuities and defined benefit investments are suboptimal.
We quantify the benefit of collectivised investment funds, in which the assets of members who die are shared among the survivors. For our model, with realistic parameter choices, an annuity or individual fund requires approximately 20\% more initial capital to provide as good an outcome as a collectivised investment fu…
The paper optimizes pension policies with guarantees and sustainability constraints.
problem Designing optimal pension policies with guarantees and sustainability constraints.
method Dynamic utility model, stochastic domain, overlapping generations, time-consistent decision criterion.
result Optimal investment/pension policy computed for a general framework.
Investigates optimal pension policies in PAYG systems with forward utility and ageing population.
problem Optimal investment and pension policies in PAYG systems with sustainability and adequacy constraints.
method Non-zero volatility forward CRRA utilities, closed-form optimal policies, detailed numerical analysis.
result Characterization of optimal policies and detailed impact analysis under various scenarios.
Paper analyzes robust strategies in a pension plan game with ambiguous financial markets.
problem Analyzing robust strategies in a defined benefit pension plan game with ambiguous financial markets.
method Formulated and solved two robust non-zero-sum games using stochastic dynamic programming.
result Explicit forms and optimality of the solutions are shown for the firm and union.
Upper bounds on utility for managing heterogeneous collectivised funds.
problem Managing pension funds with diverse investor preferences and mortality.
method Axiomatic approach to define optimal management strategies.
result Asymptotically optimal strategies for maximizing investor utility.
Optimal withdrawal strategy for DC pension plans maximizes total withdrawals while managing risk.
problem Maximizing withdrawals from DC pension plans while managing risk.
method Optimal stochastic control approach with constraints on withdrawal and asset allocation.
result Optimal strategy yields higher average withdrawals with minimal increase in risk.
We study an asset allocation stochastic problem with restriction for a defined-contribution pension plan during the accumulation phase. We consider a financial market with stochastic interest rate, composed of a risk-free asset, a real zero coupon bond price, the inflation-linked bond and the risky asset. A plan member…
Optimizes pension mix of PAYGO, EET, and individual savings.
problem Balancing PAYGO, EET, and individual savings in funded pension schemes.
method Solves a Nash equilibrium between pension participants and government, considering age-dependent preferences and optimal asset allocation.
result Identifies critical ages and optimal contribution rates for maximizing overall utility.
Study assesses additional factors for identifying persistent alpha in pension funds.
problem Identify persistent alpha in pension funds using additional factors.
method Reproduces Fama and French's (2010) experiment with additional features and compares results to 3-factor model.
result Additional factors improve persistence of alpha assessment in pension funds.
Investment strategies in occupational pension plans are optimized for non-tradable income risk.
problem Optimizing investment strategies for occupational pension plans in the presence of non-tradable income risk.
method Formulated as a stochastic optimization problem, analyzed in both constant and stochastic volatility environments.
result Random contributions induce the optimal glide path structure, influenced by initial wealth, contributions, and risk aversion.
We discuss the role of integrated chance constraints (ICC) as quantitative risk constraints in asset and liability management (ALM) for pension funds. We define two types of ICC: the one period integrated chance constraint (OICC) and the multiperiod integrated chance constraint (MICC). As their names suggest, the OICC …
Structuring a viable pension plan is a problem that arises in the study of financial contracts pricing and bears special importance these days. Deterministic pension models often rely on projections that are based on several assumptions concerning the "average" long-time behavior of the stock market. Our aim here is to…
UK universities pension scheme valuation study shows high dependence on gilt yields.
problem High dependence of UK universities pension scheme on UK government bond yields.
method Analysis of USS valuations from 2014 to 2023, examination of self-sufficiency conditions, and evaluation of metrics.
result Second self-sufficiency condition amplifies gilt yield dependence, leading to inflated liabilities and excessive prudence.
Study examines market risks on pension system sustainability.
problem Impact of market risks on pension corpus sustainability.
method Monte Carlo simulations with historical data.
result Market risks significantly impact pension corpus sustainability.
Deep neural network optimizes retirement consumption in defined contribution pensions.
problem Optimizing consumption in a defined contribution pension system.
method Formulated as a stochastic control problem, trained deep neural network policy.
result Deep neural network outperforms deterministic rules and adapts to market changes.
USS fund risk assessment shows low default chance but high overfunding.
problem Risk assessment of Universities Superannuation Scheme (USS) fund.
method Estimates risk of default and overfunding using a cautious model.
result Fund has less than 7% chance of defaulting but overfunding by at least £100bn.
A declining CVaR glidepath framework for TDF design with Chilean pension system application
problem Designing Target-Date Funds around an explicit return objective while controlling risk
method Propose a framework for designing TDFs with a declining CVaR constraint
result Key feature: conservative evaluation of each glidepath
A neural network approach solves optimal decumulation problems for pension plans.
problem Optimal asset allocation and withdrawal strategies for DC pension holders.
method Data-driven neural network optimization with customized activation functions.
result The neural network approach learns near-optimal solutions comparable to HJB PDE methods.
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is derived and several properties of this index are shown. In particular, it is proven…
Optimal portfolios for fat-tailed risks using a new tail risk measure.
problem Optimizing portfolios for pension funds and insurance liabilities with extreme risk sensitivity.
method Developed a new tail risk measure (Extreme Deviation, XD) and optimized portfolios based on this measure.
result Optimal portfolios maximize return per unit of XD, balancing hedging and risk contributions.
Dynamic rule-based investment strategies outperform static ones in pension schemes.
problem Managing retirement income with dynamic investment strategies.
method Rule-based investment strategies compared to dynamic programming.
result Rule-based strategies achieve higher probability of meeting retirement income targets.
Study on pooled annuity funds and how initial savings affect income stability.
problem Analyzing the stability of income payments in pooled annuity funds.
method Examining the influence of initial savings on income fluctuations and developing a criterion for pooling funds.
result Identification of a term, the 'implied number of homogeneous members', linking initial savings to income fluctuations.
Study improves pension scheme efficiency in Kenya through governance and risk management.
problem Limited research on efficiency of Kenyan pension schemes under governance structures.
method Quantitative panel regression analysis on 128 Kenyan pension schemes over 7 years.
result Employee board members have a significant positive effect on pension scheme efficiency.
Stochastic model for pension insurer assets and liabilities with mortality risk.
problem Modeling assets and liabilities with mortality risk in pensions insurers.
method Multivariate stochastic process for asset and liability returns, capturing dynamics and dependencies.
result Efficient computation of a million scenarios on personal computers.
Paper proposes decentralized annuities for better retirement security.
problem Current pension systems' limitations and fairness issues.
method Theoretical models and fairness concepts analysis.
result Decentralized annuities offer enhanced flexibility and social welfare.
This article presents a new model for demographic simulation which can be used to forecast and estimate the number of people in pension funds (contributors and retirees) as well as workers in a public institution. Furthermore, the model introduces opportunities to quantify the financial ows coming from future populatio…
The main purpose of this paper is to analyze solutions to a fully nonlinear parabolic equation arising from the problem of optimal portfolio construction. We show how the problem of optimal stock to bond proportion in the management of pension fund portfolio can be formulated in terms of the solution to the Hamilton-Ja…