A Dynamic Accumulation Model for the Second Pillar of the Slovak Pension System

Soòa Kiliánová, Igor Melicherèík () and Daniel Ševèoviè
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Soòa Kiliánová: Department of Applied Mathematics and Statistics, Faculty of Mathematics, Physics and Informatics, Comenius University, Bratislava, Slovakia, http://www.fmph.uniba.sk/
Igor Melicherèík: Department of Applied Mathematics and Statistics, Faculty of Mathematics, Physics and Informatics, Comenius University, Bratislava, Slovakia, http://www.fmph.uniba.sk/
Daniel Ševèoviè: Department of Applied Mathematics and Statistics, Faculty of Mathematics, Physics and Informatics, Comenius University, Bratislava, Slovakia, http://www.fmph.uniba.sk/
Authors registered in the RePEc Author Service: Daniel Sevcovic

Czech Journal of Economics and Finance (Finance a uver), 2006, vol. 56, issue 11-12, 506-521

Abstract: Since January 2005, pensions in Slovakia are operated by a three-pillar system as proposed by the World Bank. This paper concentrates on the mandatory, fully funded second pillar. The authors present a dynamic accumulation model for determining the optimal switching strategy among pension funds with different risk profiles. The resulting strategies depend on the individual risk preferences of future pensioners. The authors´ results illustrated that gradual decreasing risk while amassing savings for a pension is rational. Furthermore, the authors present several simulations of optimal fund-switching strategies for various model parameter settings.

Keywords: Bellman equation; dynamic stochastic programming; funded pillar; pension portfolio simulations; risk aversion; Slovak pension system; utility function (search for similar items in EconPapers)
JEL-codes: C15 E27 G11 G23 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:56:y:2006:i:11-12:p:506-521

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