Plan member?s heterogeneity, economic regime effect and their implication on the management and sustainability of retirement funds
Thepdanai Danswasvong
Abstract:This research studies the importance of plan members? heterogeneity to the management of defined benefit (DB) pension fund. We propose a new multi-member model of DB pension fund that allows for heterogeneity in plan members? retirement ages, salary growths, and other characteristics. We first solve analytically for optimal management strategy and show that the sponsor?s supplementary contribution and the fund?s allocation in risky assets are determined by the cross-product between the fund?s expected retireme… Show more
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