G. Consigli, V. Moriggia, S. Vitali
Pension funds (PF) and life insurers (LI) acting as pension providers in complementary and individual pension schemes, face an asset-liability management problem in which funding conditions depend on the effectiveness of liability hedging strategy and the generation of sufficient return and liquidity surpluses. Specifically in the case of a defined benefit (DB) plan, a PF manager will be requested to maintain the market value of her asset portfolio at a level sufficient to replicate the future obligations, represented by pension payments which tipically will be inflation-adjusted and subject to different indexations rules. We present an approach based on dynamic stochastic programming where the PF will look for the minimal cost portfolio needed to replicate a long-term flow of pension payments. Liability hedging effectiveness in DB schemes implies portfolio immunization from inflation, interest rates and longevity risk.
Keywords: Pension funds, asset-liability management, dynamic stochastic programming
Scheduled
TC1 Asset Liability Management
May 31, 2016 11:45 AM
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