Robust Approaches to Pension Fund Asset Liability Management Under Uncertainty

Dessislava Pachamanova (), Nalan Gülpınar () and Ethem Çanakoğlu ()
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Dessislava Pachamanova: Babson College
Nalan Gülpınar: University of Warwick
Ethem Çanakoğlu: Bahcesehir University

Chapter Chapter 4 in Optimal Financial Decision Making under Uncertainty, 2017, pp 89-119 from Springer

Abstract: Abstract This entry considers the problem of a typical pension fund that collects premiums from sponsors or employees and is liable for fixed payments to its customers after retirement. The fund manager’s goal is to determine an investment strategy so that the fund can cover its liabilities while minimizing contributions from its sponsors and maximizing the value of its assets. We develop robust optimization and scenario-based stochastic programming approaches for optimal asset-liability management, taking into consideration the uncertainty in asset returns and future liabilities. Our focus is on computational tractability and ease of implementation under conditions typically encountered in practice, such as asymmetries in the distributions of asset returns. Computational results from tests with real and generated data are presented to illustrate the performance of these models.

Keywords: Asset-liability management; Uncertainty; Stochastic programming; Robust optimization; Asymmetry (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-3-319-41613-7_4

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DOI: 10.1007/978-3-319-41613-7_4

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