Optimal management of DB pension fund under both underfunded and overfunded cases
The authors investigate the optimal management of an aggregated defined benefit pension plan in a stochastic environment. The interest rate follows the Ornstein-Uhlenbeck model, the benefits follow the geometric Brownian motion while the contribution rate is determined by the spread method of fund amortization. The pension manager invests in the financial market with three assets: cash, a zero-coupon bond and a stock. \N\NRegardless of the initial status of the plan, it is supposed that the pension fund may become underfunded or overfunded in the planning horizon. The optimization goal of the manager is to maximize the expected utility in the overfunded region minus the weighted solvency risk in the underfunded region. By introducing an auxiliary process and related equivalent optimization problems and using the martingale method, the optimal wealth process, optimal portfolio and efficient frontier are obtained under four cases (high tolerance towards solvency risk, low tolerance towards solvency risk, a specific lower bound, and high lower bound). \N\NThe authors also obtain the probabilities that the optimal terminal wealth falls in the overfunded and underfunded regions. Numerical analyzes are presented to illustrate the manager's economic behaviors.
- Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates
- Optimal investment decisions with a liability: the case of defined benefit pension plans
- Optimal management under stochastic interest rates: the case of a protected defined contribution pension fund
- Optimal risk management in defined benefit stochastic pension funds
- Funding and investment decisions in a stochastic defined benefit pension plan with several levels of labor-income earnings
- A Stochastic Calculus Model of Continuous Trading: Optimal Portfolios
- Advances in prospect theory: cumulative representation of uncertainty
- Alpha-robust mean-variance investment strategy for DC pension plan with uncertainty about jump-diffusion risk
- Ambiguity aversion and optimal derivative-based pension investment with stochastic income and volatility
- Asset allocation under loss aversion and minimum performance constraint in a DC pension plan with inflation risk
- Constant proportion portfolio insurance in defined contribution pension plan management
- Lifetime investment and consumption using a defined-contribution pension scheme
- Optimal asset allocation for aggregated defined benefit pension funds with stochastic interest rates
- Optimal consumption and portfolio policies when asset prices follow a diffusion process
- Optimal investment decisions with a liability: the case of defined benefit pension plans
- Optimal investment with S-shaped utility and trading and value at risk constraints: an application to defined contribution pension plan
- Optimal management of DC pension fund under the relative performance ratio and VaR constraint
- Optimal management of DC pension plan in a stochastic interest rate and stochastic volatility framework
- Optimal management of DC pension plan under loss aversion and value-at-risk constraints
- Optimal management under stochastic interest rates: the case of a protected defined contribution pension fund
- Optimal Portfolio and Consumption Decisions for a “Small Investor” on a Finite Horizon
- Portfolio optimization in a defined benefit pension plan where the risky assets are processes with constant elasticity of variance
- Pricing interest-rate-derivative securities
- Prospect Theory: An Analysis of Decision under Risk
- Stochastic lifestyling: optimal dynamic asset allocation for defined contribution pension plans
- Stochastic pension fund modelling
- Stochastic pension funding when the benefit and the risky asset follow jump diffusion processes
- Target-driven investing: optimal investment strategies in defined contribution pension plans under loss aversion
This page was built for publication: Optimal management of DB pension fund under both underfunded and overfunded cases
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q6587494)
