An Optimal Turkish Private Pension Plan with a Guarantee Feature

Ayşegül İşcanog̃lu-Çekiç
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Ayşegül İşcanog̃lu-Çekiç: Department of Econometrics, Faculty of Economics and Administrative Sciences, Trakya University, 22030 Edirne, Turkey

Risks, 2016, vol. 4, issue 3, 1-12

Abstract: The Turkish Private Pension System is an investment system which aims to generate income for future consumption. This is a volunteer system, and the contributions are held in individual portfolios. Therefore, management of the funds is an important issue for both the participants and the insurance company. In this study, we propose an optimal private pension plan with a guarantee feature that is based on Constant Proportion Portfolio Insurance (CPPI). We derive a closed form formula for the optimal strategy with the help of dynamic programming. Moreover, our model is evaluated with numerical examples, and we compare its performance by implementing a sensitivity analysis.

Keywords: Private Pension Plans; Guaranteed Products; CPPI; HJB-Equation (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2016
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