Stochastic pension funding when the benefit and the risky asset follow jump diffusion processes

Josa-Fombellida, Ricardo; Rincón‐Zapatero, Juan Pablo

doi:10.1016/j.ejor.2012.01.033

Cited by 39 publications

(17 citation statements)

References 13 publications

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“…efforts mainly on these schemes (see Haberman and Sung, 1994;Haberman and Vigna, 2001;Battocchio and Menoncin, 2004;Hainaut and Deelstra, 2011), while a few papers deal with the case of defined benefit (DB) schemes (Josa-Fombellida and Rincón-Zapatero, 2010). To our knowledge, only Josa-Fombellida and Rincón-Zapatero (2012) tackle the problem of a pension scheme with both contributions and pension income driven by jumps. Here, we concentrate on the case of a consumer/investor who deals with both constant contributions and pension income while maximising the expected utility of his/her inter-temporal consumption.…”

Section: Introductionmentioning

confidence: 98%

Portfolio optimisation with jumps: Illustration with a pension accumulation scheme

Courtois

Menoncin

2015

Journal of Banking & Finance

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Section: Introductionmentioning

confidence: 98%

Portfolio optimisation with jumps: Illustration with a pension accumulation scheme

Courtois

Menoncin

2015

Journal of Banking & Finance

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“…We call these “benchmark” strategies because this type of strategies is frequently recommended by investment advisors [17–19]. Similar questions have been investigated by many authors [20–29].…”

Section: Introductionmentioning

confidence: 99%

Long-Run Savings and Investment Strategy Optimization

Gerrard

Guillén

Nielsen

et al. 2014

The Scientific World Journal

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We focus on automatic strategies to optimize life cycle savings and investment. Classical optimal savings theory establishes that, given the level of risk aversion, a saver would keep the same relative amount invested in risky assets at any given time. We show that, when optimizing lifecycle investment, performance and risk assessment have to take into account the investor's risk aversion and the maximum amount the investor could lose, simultaneously. When risk aversion and maximum possible loss are considered jointly, an optimal savings strategy is obtained, which follows from constant rather than relative absolute risk aversion. This result is fundamental to prove that if risk aversion and the maximum possible loss are both high, then holding a constant amount invested in the risky asset is optimal for a standard lifetime saving/pension process and outperforms some other simple strategies. Performance comparisons are based on downside risk-adjusted equivalence that is used in our illustration.

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“…Haberman and Sung (1994), Chang (1999), Cairns (2000), Haberman, Butt and Megaloudi (2000), Rincón-Zapatero (2001, 2004), Chang et al (2002Chang et al ( , 2003, Delong et al (2008), Xu et al (2007) and Hainaut (2014), among others. Some extensions include stochastic interest rates, as in Huang and Cairns (2006), Josa-Fombellida and Rincón-Zapatero (2010) or Hainaut and Deelstra (2011), or the consideration of jumps in the evolution of benefits and/or risky assets, as in Josa-Fombellida and Rincón-Zapatero (2012) or Le Courtois and Menoncin (2015) (the latter in defined contribution pension plans). When the fund is overfunded, the sponsor could face slightly more risky investments to try to raise fund assets 1 .…”

Section: Introductionmentioning

confidence: 99%

Equilibrium strategies in a defined benefit pension plan game

Josa-Fombellida

Rincón‐Zapatero

2019

European Journal of Operational Research

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We study the optimal management of an aggregated overfunded pension plan of defined benefit type as a two-player noncooperative differential game. The model's key fact is to consider the fund surplus as a strategic variable that makes the pension plan more attractive both for current and future participants. We let the worker participants to act collectively as a single player that claims a share of the surplus, and let the sponsoring firm act as the player that cares about the investment of the surplus fund assets. The union's objective is to maximize the expected discounted utility of the extra benefits claimed. We solve this asymmetric game under two different assumptions on the preferences of the firm: in the first scenario, the firm aims to maximize expected discounted utility derived from fund surplus; while in the second scenario, the firm cares about minimizing the probability that the fund surplus reaches very low values.

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Stochastic pension funding when the benefit and the risky asset follow jump diffusion processes

Cited by 39 publications

References 13 publications

Portfolio optimisation with jumps: Illustration with a pension accumulation scheme

Portfolio optimisation with jumps: Illustration with a pension accumulation scheme

Long-Run Savings and Investment Strategy Optimization

Equilibrium strategies in a defined benefit pension plan game

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