Optimal ALM strategies for defined benefit pension plans

Arun S. Muralidhar and Ronald J. P. van der Wouden

Journal of Risk

Abstract: ABSTRACT This paper focuses on the practical implications of certain "alternative" investment strategies for pension plans. It compares these strategies and describes the conditions under which they can lead to efficiency gains for pension plans from an asset-liability management (ALM) context. It is demonstrated that relatively simple strategies can achieve substantial efficiency gains. In a seemingly counterintuitive result, leverage strategies, both static and dynamic, are risk-reducing and hence outperform basic and derivative-based strategies. The result follows since dynamic leveraging replicates, more cost effectively, any derivative strategy in an ALM context. More important, when asset-liability markets are incomplete, asset-liability strategies will outperform asset-only strategies.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-risk/2161142/optimal- ... enefit-pension-plans (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ4:2161142

Access Statistics for this article

More articles in Journal of Risk from Journal of Risk
Bibliographic data for series maintained by Thomas Paine ().